Arbitration Decisions on Transfer Pricing: A Trend Favoring Taxpayers?

This study aims to analyse the transfer pricing practiced by related entities. This matter has special relevance due to the nature of the transactions and all the problems related to tax litigation in this matter. The empirical study carried out on tax disputes in the area of transfer pricing in Portugal reveals that the vast majority of the74 arbitration decisions issued between 2012 and 2024 are favorable to taxpayers. To carry out this work, we intend to understand the evolution of the decisions of the Arbitration Court of the Administrative Arbitration Center (CAAD) with a view to assessing the possible occurrences of erosion of the tax base. Therefore, we present a qualitative approach based on the study of arbitration case law, taking into account the growing tendency of taxpayers to resort to arbitration to resolve disputes. In this study, we analysed the arbitration decisions and concluded that in all 74 arbitration decisions, between October 2012 and August 2024, the operations most contested by the Tax and Customs Authority (AT) are financial operations and transactions of goods between related companies. Most of the decisions favorable to the taxable person are related to the principle of comparability of interconnected transactions, the methodology used to determine transfer prices, the legal assumptions applicable to intra-group transactions, and the intervention of jurisdictions with more favorable tax regimes. This study is limited to case law from 2012 to 2024 by arbitral tribunals. It does not take into account case law from other courts and countries, which could have resulted in different conclusions regarding transfer pricing decisions. There are also limitations resulting from the applicability of the arm's length principle and comparability, as well as the complexity of transfer pricing, which involves multidisciplinary concepts and requires a subjective analysis of comparability between operations. DOI:https://doi.org/10.54663/21829306.2026.SpecialIssueOMS.64-85