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Category: Business Restructuring

In the context of transfer pricing, business restructuring is defined as the cross-border redeployment by a multinational enterprise of functions, assets and/or risks. A business restructuring may involve cross-border transfers of valuable intangibles. It may also or alternatively involve the termination or substantial renegotiation of existing arrangements. Business restructurings can also consist of the rationalisation, specialisation or de-specialisation of operations including the downsizing or closing of operations.

  • Conversion of full-fledged distributors into limited-risk distributors or commissionnaires for a foreign associated enterprise that may operate as a principal,
  • Conversion of full-fledged manufacturers into contract-manufacturers or toll-manufacturers for a foreign associated enterprise that may operate as a principal,
  • Transfers of intangible property rights to a central entity (e.g. a so-called “IP company”) within the group.

Netherland vs. A BV, October 2017, Lower Court, case no 2017: 5965

A Dutch parent company was providing support services to its foreign subsidiary on a cost-plus basis and received a compensation fee following a business restructuring where headquarter and strategic functions was transferred from the Dutch parent company to Switzerland. The Dutch tax authorities took the view that the compensation paid was insufficient, and that the Dutch parent company was still performing strategic functions for the group. The Court ruled that the taxpayer had fulfilled its […]

Netherlands vs Restructuring BV, September 2017, Rechtbank ZWB, No BRE 15/5683

In this case a Dutch company was engaged in smelting of zinc. The business was then restructured, for which the company received a small compensation payment. Dutch tax authorities disagreed with both the amount of compensation payment and the arm’s-length remuneration of the post restructuring manufacturing activities. Until 2003 the Dutch Company was a fully fledged business. The company owned the assets and controlled the risks relating to the activities. In the years after 2003, the company was involved in several business restructurings: Activities other than the actual production activities […]

Israel vs. Gteko Ltd (Microsoft), June 2017, District Court

In November 2006 Microsoft Corp. purchased 100% of the shares of Gteko Ltd. (IT Support technology), for USD 90 million. The purchase was made with the intention of integrating Gteko’s technology into Microsoft’s own products. Following this purchase of Gteko Ltd., the employees were transferred to the local Microsoft subsidiary and a few months later another agreement was entered transferring Gteko’s intellectual property/intangibles to Microsoft. This transfer was priced at USD 26 million based on the purchase price allocation (PPA). The […]

Spain vs. Dell, June 2016, Supreme Court, Case No. 1475/2016

Dell Spain is part of a multinational group (Dell) that manufactures and sells computers. Dell Ireland, operates as distributor for most of Europe. Dell Ireland has appointed related entities to operate as its commissionaires in several countries; Dell Spain and Dell France are part of this commissionaire network. The Dell Group operates through a direct sales model. Purchase orders are placed on a web page or in a call centre. Dell Spain operated as a full-fledged distributor. After the restructuring, […]

Denmark vs Corp. October 2015, Supreme Court, case nr. SKM2015.659.HR

A Danish production company terminated a 10-year license and distribution agreement with a group distribution company one year prior to expiry of the agreement. The distribution agreement was transferred to another group company and the new distribution company agreed as a successor in interest to pay a “termination fee” to the former distribution company. However, the termination fee was paid by the Danish production company and the amount was depreciated in the tax-return. The Danish […]

France vs. Sociétè Nestlé Finance , Feb 2013, CAA no 11PA02914 and 12PA00469

In the Nestlé Finance case, a cash pool/treasury activity was transferred to a related Swiss entity. The function had been purely administrative, carried out exclusively for the benefit of parties related to the French company. The French company did not receive any compensation for the transfer of the cash pooling activity. First the Administrative Court concluded that the transfer of an internal administrative function to a foreign entity – even if the function only involved […]

Spain vs. Roche, January 2012, Supreme Court case nr. 1626/2008

This case is about the consequences of converting a manufacturer and full-fledged distributor into a toll manufacturer and commissionaire, without actually changing the underlying operations. The Supreme Court decided that the restructured Spanish entity acted as a manufacturing agent that created a PE. The profits attributed to the PE included not only the manufacturing profits but also the profits from the distribution activity on behalf of Roche Vitamins Europe Ltd. in Switzerland. Prior to a business restructuring in 1999, the Spanish subsidiary was […]

Spain vs. Borex, February 2011, National Court case nr. 80-2008

A Spanish subsidiary of a UK Group (Borex), which imported, processed and sold the materials to third parties, was transformed into a a contract manufacturer. The Spanish subsidiary signed two separate contracts with the UK parent, one for warehousing and the provision of services and the other in respect of an sales agency. Under the first contract, the minerals purchased by the parent would be stored and processed by the subsidiary, which would also provide other relevant […]

France vs. Zimmer Ltd., March 2010, Conseil D’Etat No. 304715, 308525

The French company, Zimmer SAS, distributed products for Zimmer Limited. In 1995 the company was converted into a commissionaire (acting in its own name but on behalf of Zimmer Ltd.). The French tax authorities argued that the commissionaire was taxable as a permanent establishment of the principal, because the commissionaire could bind the principal. The Court ruled that the commissionaire could not bind the principal. Therefore, the French commissionaire could not be a permanent establishment of the […]

Norway vs. Cytec. September 2007, LRD 2007/1440

This case is about business restructuring and transfer of intangibles – customer portfolio, technology, trademarks and goodwill. Cytec Norge was originally a full-fledged manufacturer that was changed into a toll manufacturer. The customer portfolio, technology, trademarks and goodwill were transferred to the related entity, Cytec Netherlands, free of charge. The court found that Cytec Norge AS had held intangibles of considerable value prior to the business restructuring in 1999, and that the Norwegian entity should have received an […]

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