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Category: Financial Transactions

In transfer pricing financing transactions includes inter-company loans, treasury activity (eg. cash pooling), and guarantees within MNEs.

UN Manual on Transfer Pricing – draft update on Financial Transactions and Profit Splits

Posted on | By United Nations | No comments

A new version of the UN Practical Manual on Transfer Pricing for Developing Countries is due by 2021. According to the mandate the new manual will make further improvements in usability and practical relevance, updates and improvements to existing text, including on Country Practices (Part D) and will have new content, in particular, on financial transactions; profit splits, centralized procurement functions and comparability issues. A draft paper was published 8 April 2019 containing further guidance […]

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Commission opens in-depth investigation into tax treatment of Huhtamäki in Luxembourg

Posted on | By European Commission | No comments

The European Commission has now opened an in-depth investigation to examine whether tax rulings granted by Luxembourg to Finnish food and drink packaging company Huhtamäki may have given the company an unfair advantage over its competitors, in breach of EU State Aid rules. Margrethe Vestager, Commissioner in charge of competition policy, said: “Member States should not allow companies to set up arrangements that unduly reduce their taxable profits and give them an unfair advantage over […]

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India vs Aegis Ltd, January 2018, High Court of Bombay, Case No 1248 of 2016

Posted on | By Courts of India | No comments

In this case Aegis Ltd had advanced money to an assosiated enterprice (AE)  and recived preference shares carrying no dividend in return. The Indian Transfer Pricing Officer (TPO) held that the “acqusition of preference shares” were in fact equivalent to an interest free loan advanced by Aegis Ltd to the assosiated enterprice and accordingly re-characterised the transaction and issued an assessment for 2009 and 2010 where interest was charged on notional basis. Aegis Ltd disagreed with […]

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Netherlands vs X B.V., November 2018, Supreme Court, Case No 17/03918

Posted on | By Courts of Netherlands | No comments

In this case Company X B.V. held all the shares in the Irish company A. The Tax Agency in the Netherlands claimed that the Irish company A qualified as a “low-taxed investment participation”. The court agreed, as company A was not subject to a taxation of 10 per cent or more in Ireland. The Tax Agency also claimed that X B.V.’s profit should include a hidden dividend due to company A’s providing an interest-free loan […]

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Luxembourg vs Lender Societe, November 2018, Tribunal Administratif, Case No 40348

Posted on | By Courts of Luxembourg | No comments

In this case Lender Societe had acquired real estate in 2008 for EUR 26 million. The acquisition had been financed by a bank loan of EUR 20 million and a shareholder loan of EUR 6 million. The interest rate on the shareholder loan was set at 12%. The Tax Authorities found that the “excessive” part of the interest paid on the shareholder loan was as a hidden distribution of profit subject to dividend withholding tax. The hidden profit distribution was […]

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UK vs Union Castle Ltd, October 2018, UK Upper Tribunal, Case No 0316 (TCC)

Posted on | By Courts of the UK | No comments

In this case, Union Castle Ltd. calimed a tax deduction of £ 39 million related to losses on derivative contracts. After acquiring derivative contracts, Union Castle issued bonus A shares to it’s parent company, Caledonia, which carried a dividend equal to 95% of the cash-flows arising on the close-out of the contracts. Therefore Union Castle had written off 39 million of the value of the contracts in it’s accounts. The tax authorities disagreed that a […]

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Canada vs Loblaw Financial Holdings Inc., September 2018, Tax Court of Canada, Case No 2018 TCC 182

Posted on | By Courts of Canada | No comments

In this case the Tax Court found that Canadian grocery chain Loblaw using an offshore banking affiliate in a low tax jurisdiction – Barbados – to manage groups investments did not constituted tax avoidance. However, the court’s interpretation of a technical provision in the Canadian legislation had the consequence that Loblaw would nonetheless have to pay $368 million in taxes and penalties. It has later been stated that Loblaw will appeal the decision of the Tax […]

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Luxembourg vs PPL-Co, July 2017, Cour Administrative, Case No 38357C

Posted on | By Courts of Luxembourg | No comments

In this case the Administrative Court re-characterised a profit-participating loan into equity for tax purposes. The court provided the following reasoning: “Compared with the criteria specified above for a requalification as a disguised contribution of capital, it should firstly be noted that the sums made available to the two subsidiaries were allocated to investments in properties intended in principle to represent investments in the medium or long term as assets of the invested assets and […]

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Netherlands vs B.V, July 2018, Hoge Raad Case No 17/04930 17/05713 17/05714

Posted on | By Courts of Netherlands | No comments

It follows from various Supreme Court judgments in the Netherlands that a loan is commercially irrational if no interest can be determined under which an independent third party would have been willing to grant the same loan. The consequence of a loan beeing deemed commercially irrational is that a loss is not deductible. This case addresses the implications of the Umbrella Judgement, in particular the question of how that judgment relates to case laws on […]

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