October 18, 2012 / 2:05 PM / 5 years ago

Canada court rules for Glaxo in pricing tax case

OTTAWA, Oct 18 (Reuters) - The Supreme Court of Canada ruled on Thursday for GlaxoSmithKline Plc in a tax case on whether the drug conglomerate inappropriately charged its Canadian subsidiary high prices to avoid Canadian taxes.

The case dealt with the taxes of the GlaxoSmithKline’s subsidiary from 1990-93 but it was important as it marked the first time Canada’s top court dealt with the issue of transfer pricing - prices charged among company affiliates.

The court ruled unanimously that it was appropriate for the Canadian subsidiary to pay more for pharmaceutical ingredients than a generic drug maker might pay, because of all the benefits that flow under its license agreement with GlaxoSmithKline.

GlaxoSmithKline lost on one less important point, which is that the case will now be sent back to the tax court to decide exactly what a reasonable price would have been for the Canadian subsidiary to have paid. But at least a reasonable price will be seen as higher than what generic drugmakers would pay.

The name of the case is Her Majesty the Queen v. GlaxoSmithKline Inc (33874)

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