Terex Italia faced tax adjustments from Italian authorities after audits for 2009 and 2010 challenged the use of the Transactional Net Margin Method (TNMM) in pricing transactions with its UK distributor, GENIE UK. The authorities argued that this resulted in sales below cost, applying the Comparable Uncontrolled Price (CUP) method to increase taxable income. Terex’s appeals were rejected by lower courts, prompting an escalation to the Supreme Court. The court ultimately ruled in favor of Terex, emphasizing the importance of consistency in transfer pricing methodologies and criticizing the authorities’ dismissal of the TNMM without adequate justification.
