Category: Legality – Legitimacy – Constitutional

Belgium vs ENGIE CC cv, January 2021, Supreme Court, Case No F.18.0140.N

Belgium vs ENGIE CC cv, January 2021, Supreme Court, Case No F.18.0140.N

ENGIE CC granted a loan to one of its group companies (Electrabel Nederland Holding bv). In 2005 Electrabel Holding bv repaid the loan prematurely and paid – as contractually stipulated – a reinvestment fee of EUR 5,611,906.11 to the plaintiff. Following a tax audit in 2008, the tax authorities established that an incorrect interest rate had been used and that the reinvestment fee should only have been EUR 2,853,070.69, hence EUR 2,758,835.42 was overpaid. The tax authorities issued an assessment to ENGIE, according to which the excess amount would be taxed as an abnormal or gratuitous advantage. ENGIE then took the unilateral initiative to repay the excess amount to Electrabel Nederland Holding bv. On that basis ENGIE contested the qualification of the excessive part of the reinvestment fee as an abnormal or gratuitous advantage, since it would have been an error and therefore an undue payment ... Continue to full case
South Africa vs ABC (PTY) LTD, January 2021, Tax Court of Johannesburg, Case No IT 14305

South Africa vs ABC (PTY) LTD, January 2021, Tax Court of Johannesburg, Case No IT 14305

ABC Ltd is in the business of manufacturing, importing, and selling chemical products. It has a catalyst division that is focused on manufacturing and selling catalytic converters (catalysts). Catalysts are used in the abatement of harmful exhaust emissions from motor vehicles. To produce the catalysts, applicant requires, inter alia, some metals known as the Precious Group of Metals (PGMs). It purchases the PGMs from a Swiss entity (“the Swiss Entity”). The PGMs are liquified and mixed with other chemicals to create coating for substrates, all being part of the manufacturing process. Once the manufacturing is complete, the catalysts are sold to customers in South Africa known as the original equipment manufacturers (OEMs). ABC Ltd and the Swiss Entity are connected parties as defined in section 1 of the ITA. Following an audit carried out in 2014 the revenue service issued an assessment for FY 2011 ... Continue to full case
Canada vs Dow Chemical Canada ULC. Dec 2020, Tax Court, Case No. 2020 TCC 139

Canada vs Dow Chemical Canada ULC. Dec 2020, Tax Court, Case No. 2020 TCC 139

This decision is about the jurisdiction of the Tax Court of Canada, or perhaps more accurately about the scope of an appeal of an assessment. It arises in the context of an appeal by Dow Chemical Canada ULC of a reassessment of its 2006 taxation year. The reassessment increased Dow Chemical’s income under the transfer pricing provisions in section 247 of the Income Tax Act. In reassessing Dow Chemical for its 2006 and 2007 taxation years, the tax authorities had increased Dow Chemical’s income in respect of certain transactions with non-residents to which Dow Chemical is related. The authorities initially indicated that the transfer pricing provisions also would result in a downward adjustment to Dow Chemical’s income in those taxation years in respect of another transaction. However, the most recent reassessment of Dow Chemical’s 2006 taxation year did not reflect the downward adjustment, although the ... Continue to full case
Romania vs Impresa Pizzarotti & C SPA Italia, October 2020, ECJ Case C-558/19

Romania vs Impresa Pizzarotti & C SPA Italia, October 2020, ECJ Case C-558/19

A Regional Court of Romania requested a preliminary ruling from the European Court of Justice in the Case of Impresa Pizzarotti. Impresa Pizzarotti is the Romanian branch of SC Impresa Pizzarotti & C SPA Italia (‘Pizzarotti Italia’), established in Italy. In 2017, the Romanian tax authorities conducted an audit of an branch of Impresa Pizzarotti. The audit revealed that the branch had concluded, as lender, two loan agreements with its parent company, Pizzarotti Italia: one dated 6 February 2012 for EUR 11 400 000 and another dated 9 March 2012 for EUR 2 300 000. Those sums had been borrowed for an initial period of one year, which could be extended by way of addendum, that the loan agreements did not contain any clause concerning the charging of interest by Impresa Pizzarotti, and that although the outstanding amount as of 1 January 2013 was EUR 11 250 000, both ... Continue to full case
Belgium vs ALCOPA N.V, September 2020, Supreme Court, Case No RG F.19.0056.N

Belgium vs ALCOPA N.V, September 2020, Supreme Court, Case No RG F.19.0056.N

The dispute concerns a tax assessments issued by the plaintiff (the Belgian tax administration) for FY 2002 and 2003. In particular, the claimant (Alcopa N.V – the first company to sign a European distribution contract with Hyundai) contests the classification of reimbursements received from the Korean company HYUNDAI MOTOR COMPANY for publicity services, for an amount of EUR 1,965,630.46 in assessment year 2002 and for an amount of EUR 1,057,007.00 in assessment year 2003, as abnormal or gratuitous benefits and the consequent rejection of the DBI [Definitief Belaste Inkomsten] deduction from the profits arising from those abnormal or gratuitous benefits in application of Section 207 ITC92. The Antwerp Court of First Instance, Antwerp Division, ruled by judgment dated 13 January 2016 that it was indisputably established that abnormal or gratuitous benefits were granted to the plaintiff, so that the tax administration correctly applied Section 207(2) ... Continue to full case
Peru vs Colegio de Abogados de La Libertad, September 2020, Constitutional Court, Case No 556/2020

Peru vs Colegio de Abogados de La Libertad, September 2020, Constitutional Court, Case No 556/2020

In February 2019, Colegio de Abogados de La Libertad (CALL) in Peru filed an appeal before the Constitutional Court claiming that tax debts of at least 9 billion soles (USD 2,5 billions) owed by 158 large companies could not be collected by the tax authorities (SUNAT) due to the statute of limitation in Legislative Decree 1421. By four votes against and one vote for, the Constitutional Court rejected the claim. NoCOMPANY/TAXPAYERSTATUTE OF LIMITATIONS INVOKEDSTATUTE OF LIMITATIONS NOT INVOKEDTOTAL 1COMPAÑIA DE MINAS BUENAVENTURA S.A.A.2.083.106.4842.083.106.484 2SCOTIABANK PERU SAA1.076.546.4201.076.546.420 3COMPAÑIA MINERA ANTAPACCAY S.A.2.961.028725.065.302728.026.330 4MINERA LAS BAMBAS S.A.698.986.212698.986.212 5SOCIEDAD MINERA CERRO VERDE S.A.A542.560.586542.560.586 6TELEFONICA DEL PERU SAA301.180.21257.714.287358.894.499 7LATAM AIRLINES PERU S.A.332.312.17118.782.845351.095.016 8CONSORCIO MINERO S.A. EN LIQUIDACION122.737.710171.965.780294.703.490 9EMPRESA MINERA LOS QUENUALES S.A.255.456.549255.456.549 10AMERICA MOVIL PERU S.A.C.246.510.566246.510.566 11ENEL GENERACION PERU S.A.A.236.223.504236.223.504 12VOLCAN COMPANIA MINERA S.A.A161.464.638161.464.638 13SUPERMERCADOS PERUANOS SOCIEDAD ANONIMA 'O ' S.P.S.A33.294.659104.866.817138.161.476 14UNIVERSIDAD PERUANA DE CIENCIAS APLICADAS S.A.C128.889.678128.889.678 15COMPANIA MINERA ANTAMINA ... Continue to full case
Poland vs "Fish Factory" sp. z o.o., July 2020, Administrative Court, I SA/Gd 184/20 - Wyrok

Poland vs “Fish Factory” sp. z o.o., July 2020, Administrative Court, I SA/Gd 184/20 – Wyrok

The activity of Spółka A sp. z o.o. included salmon breeding, processing, smoking and sale and distribution of the finished products. The company operated within Group A with head quarter in the Netherlands. By decision of 27 May 2019, the tax authorities determined that the operating expenses determined by transactions with related parties were inflated by PLN 29,613,156.00. The authorities did not accept calculations presented by the Company, as there were no reliable accounting records regarding the amount of costs incurred. Furthermore, the authorities held that the cost plus method, which should guarantee profit on the transaction in the Company, had been applied incorrect. The dispute before the administrative Court boils down to assessing whether the court of first instance, in compliance with the provisions in force, reversed the decision of the authorities in its entirety and referred the case back for reconsideration due to ... Continue to full case
Tanzania vs JSC ATOMREDMETZOLOTO (ARMZ), June 2020, Court of Appeal, Appeals No 78-79-2018

Tanzania vs JSC ATOMREDMETZOLOTO (ARMZ), June 2020, Court of Appeal, Appeals No 78-79-2018

JSC Atomredmetzolo (ARMZ) is a chartered open Joint Stock Company incorporated in the Russian Federation dealing in uranium mining industry. Late 2010, the Company purchased from the Australia Stock Exchange all shares in Mantra Resources Limited (Mantra Resources) a company incorporated in Australia and owner of Mkuju River Uranium project located Tanzania. Following the acquisition of all the issued shares in Mantra Australia, JSC Atomredmetzolo became a sole registered and beneficiary owner of shares in Mantra Australia making Mantra Australia a wholly owned subsidiary of JSC Atomredmetzolo. Hence Mantra Tanzania and Mkuju River Uranium Project were placed under the control of JSC Atomredmetzolo who had a majority 51.4% shareholding in a Canadian Uranium exploration and mining company named Uranium One Inc. Thus, JSC Atomredmetzolo opted to invest in the Mkuju River Uranium project through Uranium One based in Canada. Subsequently, JSC Atomredmetzolo entered into a ... Continue to full case
Chile vs Monsanto Chile S.A, April 2020, Tribunal Constitucional de Chile, Case N° Rol 7864-19-INA

Chile vs Monsanto Chile S.A, April 2020, Tribunal Constitucional de Chile, Case N° Rol 7864-19-INA

Monsanto Chile, Since 2018 a subsidiary in the Bayer group, had been issued a tax assessment related to FY 2009 and 2010 resulting in additional taxes of approximately $800.000.000. and penal interest of 1,5% per month in an amount of $2.216.759.197. Monsanto filed an appeal in regards to the penal interest of $2.216.759.197. In the appeal the company argued, that the interest should be inapplicable since the case has been delayed by Courts due to both lack of activities and COVID 19. Decision of the Court In a split decision the Constitutional Court ruled in favor of Monsanto and declared the penal interest inapplicable. “For all the reasons stated in this ruling, this Court concludes that the application of the penal interest provided for in the third paragraph of Article 53 of the Tax Code, in this specific case, contravenes the constitutional guarantees contained in ... Continue to full case
Poland vs K. sp. z o.o., January 2020, Supreme Administrative Court, Case No II FSK 191/19 - Wyrok

Poland vs K. sp. z o.o., January 2020, Supreme Administrative Court, Case No II FSK 191/19 – Wyrok

K. sp. z o.o. is a Polish company belonging to an international group. The main activity of K is local sale of goods purchased from a intra group supplier. K is best characterized as a limited risk distributor and as such should achieve an certain predetermined level of profitability as a result of its activities. In order to achieve the determined level of profitability, the group had established that, if the operating margin actually achieved by the distributor during a given period is less or more than the assumed level of profit, it will be adjusted. The year-end adjustment will not be directly related to the prices of goods purchased from the intra-group supplier and will be made after the end of each financial year. The Administrative Court decided that the year-end adjustment is not sufficiently linked to obtaining, maintaining or securing the company’s income. Hence ... Continue to full case
Israel vs Broadcom, December 2019, Lod District Court, Case No 26342-01-16

Israel vs Broadcom, December 2019, Lod District Court, Case No 26342-01-16

Broadcom Semiconductors Ltd is an Israeli company established in 2001 under the name Dune Semiconductors Ltd. The Company is engaged in development, production, and sale of components to routers, switches etc. The shares in Dune Semiconductors were acquired by the Broadcom Corporation (a US group) in 2009 and following the acquisition intellectual property was transferred to the new Parent for a sum of USD 17 million. The company also entered into tree agreements to provide marketing and support services to a related Broadcom affiliate under a cost+10%, to provide development services to a related Broadcom affiliate for cost+8%, and a license agreement to use Broadcom Israel’s intellectual property for royalties of approximately 14% of the affiliate’s turnover. The tax authorities argued that functions, assets, and risks had been transferred leaving only an empty shell in Israel and a tax assessment was issued based on the purchase ... Continue to full case
Netherlands vs. Swiss Corp, November 2019, Rechtbank Noord-Nederland, Case No. 2019:1492

Netherlands vs. Swiss Corp, November 2019, Rechtbank Noord-Nederland, Case No. 2019:1492

For the purpose of determining whether a Swiss Corporation had effektivly been managed from the Netherlands or had a permanent establishment in the Netherlands, the Dutch tax authorities send a request for information. The Swiss Corp was not willing to answere the request and argued that the request was disproportionate and that the concepts of “documents concerning decision-making with regard to important decisions” and “e-mail files” was and did not fit into the powers that an inspector has under Article 47 of the AWR. The court ruled in favor of the tax authorities. The court did not find the tax authorities’ request for information disproportionate. Article 47 of the Awr requires the provision of factual information and information that may be relevant to taxation with respect to the taxpayer (cf. Supreme Court October 20, 2017, ECLI: NL: HR: 2017: 2654). In the opinion of the ... Continue to full case
Australia vs. Glencore, August 2019, High Court, Case No. [2019] HCA 26 S256/2018

Australia vs. Glencore, August 2019, High Court, Case No. [2019] HCA 26 S256/2018

The Australian Tax Office had obtained information from the Paradise Paper-leak and used the information in a tax assessment of Glencore. Glencore held that such leaked information was confidential (protected by legal professional privilege) and could not be used in a tax assessment. On that basis Glencore filed an appeal to the High Court. High Court Decision The Australien High Court dismissed the appeal and allowed use of the leaked information for tax assessment purposes. “In no way do these cases support the notion that common law courts elsewhere are granting injunctions with respect to privileged material on the basis only of the wrongfulness associated with its taking.  Certainly, it is necessary for an equity to arise that the person to be restrained must have an obligation of conscience, but the basis for an injunction is the need to protect the confidentiality of the privileged ... Continue to full case
Skatteverket vs Holmen AB, June 2019, European Court of Justice, Case no C-608/17

Skatteverket vs Holmen AB, June 2019, European Court of Justice, Case no C-608/17

The Holmen case dealt with tax deduction of losses arising in indirectly held Spanish subsidiaries would be deductible upon liquidations of the Spanish companies. The Court clarified that final losses arising in an indirectly held subsidiary, should not be deductible for the parent company, unless all the intermediate companies between the parent company and the loss-making subsidiary are resident in the same member state as the loss-making subsidiary. In the Holmen case the facts suggest that a loss could be deductible in Sweden, as all intermediate companies were from Spain. The mere fact that the legislation of the subsidiary’s state of establishment does not allow the transfer of losses in the year of liquidation can’t, in itself, be sufficient to deem the losses as “final”. The Court also stated, that losses in foreign subsidiaries can’t be characterized as “final” if there is a possibility of ... Continue to full case
Skatteverket vs Memira Holding AB, June 2019, European Court of Justice, Case no C-607/17

Skatteverket vs Memira Holding AB, June 2019, European Court of Justice, Case no C-607/17

The Memira Holding case was about a crossborder merger between a loss-making German subsidiary and a Swedish parent company. The CJEU was asked to clarify whether the German losses would be deductible in Sweden after the merger had been finalized. In the Court’s view, Memira Holding may deduct the foreign losses in Sweden, but only if the Swedish parent company can demonstrate that it is impossible to use the losses in Germany in future periods. The fact that Germany does not allow losses to be taken over through a merger is thus not decisive in itself. Further possibilities to take over the losses must be assessed. The CJEU states that losses in subsidiaries can’t be characterized as “final” if there is a possibility of deducting those losses economically in the subsidiary’s state of residence, for example by transferring them to a third party. If, on ... Continue to full case
US vs Altera Corp, June 7, 2019, US Court of Appeal, Nos 16-70496 and 16-70497

US vs Altera Corp, June 7, 2019, US Court of Appeal, Nos 16-70496 and 16-70497

The US Court of Appeal had reversed a decision from the Tax Court that 26 C.F.R. § 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was invalid under the Administrative Procedure Act. The Court of Appeal ruled that the Commissioner of Internal Revenue had not gone beyond the authority delegated under 26 U.S.C. § 482, and that the Commissioner’s rule-making authority complied with the Administrative Procedure Act. The Opinion was shortly after (August 7, 2018) withdrawn by the Court of Appeal. A final Decision was issued June 7, 2019, reaching the conclusion that 26 C.F.R. § 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing ... Continue to full case
Germany vs "C A GmbH", February 2019, Bundesfinanzhof, Case No I R 73/16

Germany vs “C A GmbH”, February 2019, Bundesfinanzhof, Case No I R 73/16

C A GmbH managed an unsecured clearing account for a Belgian subsidiary. After financial difficulties in the Belgian subsidiary, C A GmbH waived their claim from the clearing account and booked this in their balance sheet as a loss. However, the tax office disallowed the loss according to § 1 Abs. 1 AStG. Up until now, the Bundesfinanzhof has assumed for cases that are subject to a double taxation agreement (DTA), that Art. 9 para. 1 OECD was limited to so-called price corrections, while the non-recognition of a loan claim or a partial depreciation was excluded (so-called Blocking effect). The Bundesfinanzhof overturned the previous judgment of the FG. According to the court it was not necessary to determine whether it was really a tax credit or a contribution of equity to the Belgian subsidiary. However, this could be left out, since the profit-reducing waiver by C A ... Continue to full case
Canada vs Canadian Imperical Bank of Commerce, December 2018, Tax Court of Canada, Case No. 2018 TCC 248

Canada vs Canadian Imperical Bank of Commerce, December 2018, Tax Court of Canada, Case No. 2018 TCC 248

In the course of an ongoing Canadian triel concerning transfer pricing adjustments in the amounts of $3,000,000,000, the Canadian Imperical Bank of Commerce had brought a motion for leave to call in seven expert witnesses – included four transfer pricing experts. The motion was dismissed by the Court. The Federal Court Rules impose a high threshold on parties seeking to call additional expert witnesses. The fact that the appeals involved lots of money did not make them “significant to public”. Issues surrounding application of transfer pricing rules to settlement payments and relevance of accounting treatment to deductibility of expenditures within corporate group were not of broad application and need to resolve them was not particularly pressing. Expert evidence would be important in complex and technical areas of accounting and transfer pricing issues, but that alone could not support presumption that more than five transfer pricing ... Continue to full case
Malawi vs Eastern Produce Malawi Ltd, July 2018, Malawi High Court, JRN 43 af 2016

Malawi vs Eastern Produce Malawi Ltd, July 2018, Malawi High Court, JRN 43 af 2016

Eastern Produce Ltd is part of Camellia Plc Group, and is is engaged in the growing, production and processing of tea in Malawi. The Malawi tax administration conducted a tax audit and found that transfer prices for intergroup service transactions had not been at arm’s length. However, in the notifications to Eastern Produce Ltd. no reference was made to the local arm’s length regulations – only the OECD Transfer Pricing Guidelines. Eastern Produce Limited complained to the High Court and argued that: “The decision and proceeding by MRA to use OECD (Organisation for Economic Cooperation and Development) guidelines whilst performing transfer pricing analysis and as a basis for effecting amendments to tax assessments was illegal. CONSIDERATIONS OF THE COURT, EXCERPS “With regard to transfer pricing in 2014, the law was contained in Section 127A. Section 127A provides as follows: “where a person who is not resident in Malawi carries ... Continue to full case
US vs Altera Corp, July 2018, US Court of Appeal, Nos 16-704996

US vs Altera Corp, July 2018, US Court of Appeal, Nos 16-704996

The US Court of Appeal reversed a decision from the Tax Court that 26 C.F.R. § 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was invalid under the Administrative Procedure Act. The Court of Appeal ruled that the Commissioner of Internal Revenue had not gone beyond the authority delegated under 26 U.S.C. § 482, and that the Commissioner’s rule-making authority complied with the Administrative Procedure Act. The Opinion was shortly after (August 7, 2018) withdrawn by the Court of Appeal – see below. A new Decision was issued June 7, 2019 US-vs-Altera-16-70496 The Annulment issued August 7, 2018: US-vs-Altera-16-70496-Withdrawn ... Continue to full case
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