TPcases

Database of Transfer Pricing Case Laws

Argentina vs YPF S.A., May 2018, Supreme Court, Case No TF 29.205-1

Posted on May 3, 2018 | By Courts of Argentina | No comments

Category: Financial Transactions | Tag: Interest free loan, Interest rate, Intra-group loan, Loan, Penalty/Fine

« Prev | Next »

The Tax authorities considered that the financial loans made by YPF S.A. to the controlled companies YPF Gas S.A.; Maleic S.A. and Operadora de Estaciones de Servicio constituted a “disposition of income in favor of third parties”, since in the first two cases (loans granted to YPF Gas S.A. and Maleic S.A.) the agreed interest was lower than that provided for in the aforementioned regulations, while in the last case (operation carried out with OPESSA) no interest payment had even been stipulated. Likewise, it estimated that the transfer prices corresponding to gas oil, propane butane exports made to Repsol YPF Trading and Transport S.A. were below the first quartile. Consequently, it made an adjustment to the taxable income.

Furthermore, a fine equivalent to 70% of the allegedly omitted tax was issued.

At issue before the Supreme Court was only the fine which was set aside.

Click here for English Translation

Related Guidelines

TPG2022 Chapter X paragraph 10.100In some intra-group transactions, the cost of funds approach may be used to price loans where capital is borrowed from an unrelated party which passes from the original borrower through one or more associated intermediary enterprises, as a series of loans, until it reaches the ultimate borrower. In such cases,...

TPG2022 Chapter X paragraph 10.97In the absence of comparable uncontrolled transactions, the cost of funds approach could be used as an alternative to price intra-group loans in some circumstances. The cost of funds will reflect the borrowing costs incurred by the lender in raising the funds to lend. To this would be added the...

TPG2022 Chapter X paragraph 10.96In considering arm’s length pricing of loans, the issue of fees and charges in relation to the loan may arise. Independent commercial lenders will sometimes charge fees as part of the terms and conditions of the loan, for example arrangement fees or commitment fees in relation to an undrawn facility....

TPG2022 Chapter X paragraph 10.95Whereas it is unlikely that an MNE group’s average interest rate paid on its external debt meets the comparability requirements to be considered as an internal CUP, it may be possible to identify potential comparable loans within the borrower’s or its MNE group’s financing with an independent lender as the...

TPG2022 Chapter X paragraph 10.94When considering issues of comparability, the possibility of internal CUPs should not be overlooked....

TPG2022 Chapter X paragraph 10.93Arm’s length interest rates can also be based on the return of realistic alternative transactions with comparable economic characteristics. Depending on the facts and circumstances, realistic alternatives to intra-group loans could be, for instance, bond issuances, loans which are uncontrolled transactions, deposits, convertible debentures, commercial papers, etc. In the evaluation...

TPG2022 Chapter X paragraph 10.92In the search for comparability data, a comparable is not necessarily restricted to a stand-alone entity. In examining commercial loans, where the potentially comparable borrower is a member of an MNE group and has borrowed from an independent lender, provided all other economically relevant conditions are sufficiently similar, a loan...

TPG2022 Chapter X paragraph 10.91The arm’s length interest rate for a tested loan can be benchmarked against publicly available data for other borrowers with the same credit rating for loans with sufficiently similar terms and conditions and other comparability factors. With the extent of competition often present within lending markets, it might be expected...

TPG2022 Chapter X paragraph 10.90The widespread existence of markets for borrowing and lending money and the frequency of such transactions between independent borrowers and lenders, coupled with the widespread availability of information and analysis of loan markets may make it easier to apply the CUP method to financial transactions than may be the case...

TPG2022 Chapter X paragraph 10.89Once the actual transaction has been accurately delineated, arm’s length interest rates can be sought based on consideration of the credit rating of the borrower or the rating of the specific issuance taking into account all of the terms and conditions of the loan and comparability factors....

Supplemental Guidance

Czech Republic vs. DATON technology, spol. s.r.o., August 2010, Supreme Administrative Court , Case No 2 Afs 53/2010 – 63A Czech company granted interest-free loans to its managing directors and applied a fixed interest rate for the entire loan period. The tax authority challenged this approach, arguing that changes in market interest rates should be reflected annually. The Supreme Administrative Court dismissed the taxpayer's appeal in 2010, finding the...

Portugal vs “Caixa… S.A.”, February 2024, Tribunal Central Administrativo Sul, Case No 866/12.1 BELRSA Portuguese bank received a transfer pricing assessment after granting an interest-free loan to a subsidiary without charging arm's length interest. The tax authority applied the CUP method and imputed a market interest rate. The Tribunal Central Administrativo Sul dismissed the taxpayer's appeal in February 2024, upholding the adjustment and...

Italy vs Sadepan Chimica S.R.L., March 2024, Supreme Court, Sez. 5 Num. 7361 Anno 2024The Italian tax authorities assessed additional income on non-interest bearing loans granted by Sadepan Chimica S.R.L. to its foreign subsidiaries in Belgium and Luxembourg, applying notional rates of 3.83% and 5.32%. The taxpayer appealed, arguing authorities ignored specific financial conditions and misallocated the burden of proof. Italy's Supreme Court ruled...

Italy vs Edison spa., Supreme Court, June 2016, No. 13387Edison spa made payments to its foreign subsidiary Tanti Investimentos S.A., nominally as capital increase advances, but the funds were used for financial investments and later returned. The Italian Supreme Court found these were disguised interest-free loans subject to transfer pricing rules under Article 110(7), ruling in favour of the...

Italy vs SGL CARBON SPA, September 2013, Supreme Court 22010An Italian subsidiary paid interest on loans from its German parent at rates the tax authority deemed significantly above the German market average. After lower courts split on the issue, Italy's Supreme Court dismissed the taxpayer's appeal in 2013, affirming that the comparable uncontrolled price method should prioritise internal comparables,...

Italy vs Edison s.p.a. April 2016, Supreme Court no 7493An Italian company granted Lira 500 billion in non-interest-bearing funding to a related party, classified as a contribution reserved for future capital increase. The Italian tax authority challenged the arrangement under transfer pricing rules. The Italian Supreme Court held in 2016 that intra-group financing is subject to transfer pricing legislation...

France vs Montlaur Sakakini, Oct 1995, Administrative Court of Appeal, No 95LY00427A French company challenged a tax authority adjustment that set arm's length interest rates on intra-group advances at 10–12%, arguing the correct rate was 4.5%. The Lyon Administrative Court of Appeal sided with the taxpayer in 1995, finding that the rates cited by the tax authority — based on bank...

France vs. France Immobilier Group, Nov. 2012, CE no 328670A French company challenged the tax authority's assessment of intra-group loan pricing. The Council of State ruled in 2012 that the applicable interest rate should be determined by reference to the financing conditions the lender itself could have obtained from a third-party bank, deciding the case mostly in favour of...

TPcases

Argentina vs YPF S.A., May 2018, Supreme Court, Case No TF 29.205-1

Related Guidelines

Supplemental Guidance

Leave a Reply

Related Case Law