Category: Legality – Legitimacy – Constitutional

Portugal vs "S- Sociedade S.A.", January 2024, Tribunal Central Administrativo Sul, Case No 152/07.9 BESNT

Portugal vs “S- Sociedade S.A.”, January 2024, Tribunal Central Administrativo Sul, Case No 152/07.9 BESNT

“S-Sociedade S.A.” had received a tax assessment and later a judgment based on transfer pricing rules (and not anti-avoidance rules), where the outcome of the tax audit would have been different if the transactions had been purely domestic rather than international. “S-Sociedade S.A.” considered that the judgment was flawed and appealed. Judgment of the Court The Court ruled in favour of “S-Sociedade S.A.” and annulled the tax assessment. Experts in English “In this regard, the following elements can be gleaned from European Union law: “The arm’s length principle necessarily forms part of the Commission’s assessment of tax measures granted to undertakings in a group under Article 107(1) of the Treaty, irrespective of whether and in what form a Member State has incorporated this principle into its national legal system. It is used to determine whether a group company’s taxable profits for corporate income tax purposes ... Continue to full case
Peru vs Repsol Comercializadora de Gas S.A., December 2023, Supreme Court, Case No 17824-2023

Peru vs Repsol Comercializadora de Gas S.A., December 2023, Supreme Court, Case No 17824-2023

In a transfer pricing case between the Peruvian tax authorities (SUNAT) and Repsol Comercializadora de Gas S.A. where the tax court had previously decided in favor of Repsol, the Supreme Court set aside the decision of the tax court and established the following rules as binding precedent of mandatory compliance: “3.47.1. In order to determine whether, within an administrative procedure of partial or definitive audit referring to transfer pricing, the guarantee of reasonable time has been violated, the following must be analyzed and evaluated: (i) that the partial or definitive audit carried out by the tax administration is referred to the application of transfer pricing rules; (ii) that it involves companies linked to or through countries or territories of low or no taxation; (iii) the complexity to obtain the information and if the same is located in other territorial areas; (iv) the conduct of the ... Continue to full case
UK vs Refinitiv Limited, October 2023, Upper Tribunal, Case No [2023] UKUT 00257 (TCC)

UK vs Refinitiv Limited, October 2023, Upper Tribunal, Case No [2023] UKUT 00257 (TCC)

According to Refinitiv Limited a Diverted Profit Tax-notices they had been served for FY 2018 by the tax authorities were unlawful because the tax authorities had used another transfer pricing method (Profit Split) than the method previously agreed (TNMM with a cost based PLI) in respect of the same services in an earlier Advance Pricing Agreement (“APA”) covering FY 2008-2014. Judgement of the Upper Tribunal The Court did not find an inconsistency between the Diverted Profit Tax-notices issued by the tax authorities in respect of 2018 and the APA covering FY 2008-2014. The appeal of Refinitiv Limited was dismissed. Excerpt “90. HMRC’s acceptance that the 2018 profits were referable to the provision of services in 2008-2014 does not therefore assist the claimants’ case. The APA had terminated and had no effect in relation to the pricing of services for the purposes of calculating profits in ... Continue to full case
Brazil, October 2023, Superior Tribunal de Justiça (Second Chamber), Case No REsp 1.787.614-SP

Brazil, October 2023, Superior Tribunal de Justiça (Second Chamber), Case No REsp 1.787.614-SP

The Second Chamber of the Supreme Court of Brazil issued an interpretation of Normative Instruction SRF n. 243/2002 concerning the legal basis for application of the sixth method – RPL60 – under the Brazilianarm’s length provision contained in art. 18 of Law no. 9430/1996. The Second Champer of the Supreme Court concluded that the interpretation adopted by the Brazilian Federal Revenue Service through Normative Instruction SRF n. 243/2002 did not violate art. 18 of Law n. 9.430/1996. Excerpts “This is a writ of mandamus filed for the purpose of ensuring the right to calculate transfer prices using the PRL method according to the criteria established by art. 18 of Law no. 9430/1996, excluding those contained in SRF Normative Instruction no. 243/2002. The main objective of the transfer pricing methodology is to ensure that taxable events do not escape the state’s taxing power due to the ... Continue to full case
Canada vs Blackberry Limited, September 2023, Tax Court of Canada, Case No. 2023 TCC 137

Canada vs Blackberry Limited, September 2023, Tax Court of Canada, Case No. 2023 TCC 137

The order relate to the admissibility of two expert reports that Blackberry Limited wanted to submit in an appeal filed with the tax court concerning an assessment of approximately $17.1 million of FAPI (for research and development services received from US affiliates) and a reduction of the US corporate tax paid by US affiliate corporations when determining the FAT deduction. The first report contained an opinion on the development of international tax principles in Canada and the second report contained an opinion firstly, on alternative hypothetical transfer pricing structures and secondly, on the policy ramifications of a “hypothetical” model receiving similar treatment as that which the Appellant received from the Minister. The tax authorities held, that the reports were irrelevant, unnecessary and prejudicial and therefore inadmissable. Order of the Tax Court The Court ruled in favor of the tax authorities. “The two-step test for determining ... Continue to full case
South Africa vs FAST (PTY) LTD, August 2023, Tax Court, Case No IT 14305

South Africa vs FAST (PTY) LTD, August 2023, Tax Court, Case No IT 14305

FAST (PTY) 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) which is used in the abatement of harmful exhaust emissions from motor vehicles. To produce the catalysts, FAST requires some metals known as the Precious Group of Metals (PGMs). It purchases the PGMs from a Swiss entity (FAST Zug). 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). FAST (PTY) LTD and FAST Zug 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 2009-2011 by an ... Continue to full case
Nigeria vs Check Point Software Technologies B.V NIG LTD, August 2023, Tax Appeal Tribunal, Case No TAT/LZ/CIT/121/2022

Nigeria vs Check Point Software Technologies B.V NIG LTD, August 2023, Tax Appeal Tribunal, Case No TAT/LZ/CIT/121/2022

Check Point Software Technologies was assessed administrative penalties by the tax authorities (FIRS) for failure to file a country-by-country report, and a complaint was filed with the Tax Appeal Tribunal by the company. Decision of the Tribunal The Tax Appeal Tribunal held that the administrative penalties issued by the FIRS in enforcement of the CbCR Regulations were unconstitutional and void because the Board of the Federal Inland Revenue Service, which was legally empowered to make the regulations, did not exist between 2012 and 2020. Since the FIRS Board did not exist during the said period, the exercise of the delegated powers under the provisions of the Nigerian CbCR regulations was not possible – any step, process or action taken in the name of the Board would be null and void. Excerpts “A careful consideration of the provisions of Section 61 as exposed above shows that ... Continue to full case
Ghana vs Unilever Ghana Limited, July 2023, High Court of Ghana, Case no. CM/TAX/0450/2021

Ghana vs Unilever Ghana Limited, July 2023, High Court of Ghana, Case no. CM/TAX/0450/2021

Unilever Ghana Limited (UKL) filed an appeal with the High Court against an assessment of additional taxabel income issued by the tax authorities in 2019 on the following grounds. a) That the Respondent did not use a transfer pricing method as required by the Transfer Pricing Regulations, 2012 (LI 2188) in examining the Appellant Transfer Pricing Returns. b) That the Respondent misinterpreted, misunderstood and misapplied the OECD Transfer Pricing guidelines to arrive at a liability of Six Million, Two Hundred and Thirty-Six Thousand, Two Hundred Ghana Cedis (GHq:6,236,200.00) on the Advertising, Marketing and Promotion expenses incurred by the Appellant. c) That had the Respondent properly applied the OECD guidelines, the Appellant would not have been liable to pay tax on the Advertising, Marketing and promotion expenses. Judgment of the Court The High Court dismissed the appeal due to lack of statutory jurisdiction. “…I do not ... Continue to full case
Italy vs Cidiverte S.p.A., June 2023, Supreme Court, no 18206/2023

Italy vs Cidiverte S.p.A., June 2023, Supreme Court, no 18206/2023

Cidiverte S.p.A. is an Italian distributor of video-games. Following an audit, the tax authorities issued Cidiverte S.p.A an assessment of additional income resulting from a reduction of the pricing of costs it had paid to its Italian sister company. Appeals were filed by Cidiverte with the local and regional courts, but the objections were dismissed by reference to a previous judgement of the Supreme Court in Case no. 11949/2012 concerning disallowed costs in the same group. The regional court found that, Cidiverte had failed to prove the existence, pertinence and conformity of the price shown on the invoice with the arm’s length value. A study carried out by Price Waterhouse Coopers on behalf of Cidiverte was considered to be a mere “opinion” and therefore not sufficient evidence to support the deductions in question. An appeal was then filed by Cidiverte with the Supreme Court. Judgement ... Continue to full case
Ukrain vs "Forward KT Limited", June 2023, Supreme Court, Case No. 810/4044/15 (proceedings No. K/9901/25021/18)

Ukrain vs “Forward KT Limited”, June 2023, Supreme Court, Case No. 810/4044/15 (proceedings No. K/9901/25021/18)

“Forward KT Limited” submitted a report on controlled transactions for 2013 to the tax authority on 13 May 2015. The tax authority found that Forward KT Limited had failed to submit the report within the filing deadline of 1 October 2014. In an appeal “Forward KT Limited” claimed that within the meaning of Article 39 24 of the Tax Code of Ukraine, transactions where one party is a non-resident registered in a country where the income tax rate is 5 percentage points or more lower than in Ukraine, provided that the amount of such transactions exceeds UAH 50 million during a calendar year, are considered controlled. The Republic of Cyprus was included in the list of such countries from 25 December 2013, and the total amount of transactions with a non-resident for the period from 25 December 2013 to 31 December 2013 was only UAH ... Continue to full case
Brazil vs Janssen-Cilag Farmaceutica LTDA, May 2023, Superior Tribunal de Justiça (First Chamber), Case No AREsp 511.736/SP

Brazil vs Janssen-Cilag Farmaceutica LTDA, May 2023, Superior Tribunal de Justiça (First Chamber), Case No AREsp 511.736/SP

Janssen-Cilag Farmaceutica LTDA filed a request for clarification with the Superior Tribunal de Justica concerning the sixt method – PRL60 – applied in Brazil in the years in question. Accordcing to the the company, there were no legal basis for applying the method. Judgement of the Supreme Court The Court dismissed the complaint. Excerpts “The appellant has failed to demonstrate any omission or contradiction in the judgment, which was expressed in a clear and reasoned manner with regard to the issues relevant to the resolution of the dispute. According to the case law of this Court, “the purpose of a motion for clarification is simply and solely to complete, clarify or correct an omitted, obscure or contradictory decision. They are not intended to adjust the decision to the understanding of the embattled party, nor to accept claims that reflect mere nonconformity, and even less to ... Continue to full case
India vs SAP Labs India Private Ltd., April 2023, Supreme Court, Case No 8463 of 2022

India vs SAP Labs India Private Ltd., April 2023, Supreme Court, Case No 8463 of 2022

Under India’s Income Tax Act, an appeal against an order of an Income Tax Appellate Tribunal can be made to the High Court if it is satisfied that the case involves a “substantial question of law”. In the 2018 case of Softbrands India Private Ltd., the Karnataka High Court held that issues relating to the selection of comparable data and criteria for comparability in benchmarking for transfer pricing purposes do not raise a “substantial question of law”. In the 2023 case of SAP Labs India Private Ltd., the Supreme Court reversed this decision. According to the Supreme Court, it is always open to a High Court in an appeal involving transfer pricing issues to examine on a case-by-case basis whether the transfer pricing rules have been complied with or not and whether there is any perversity in the findings made by the Tribunal in determining ... Continue to full case
Canada vs Dow Chemicals, February 2023, Supreme Court, Case No. 40276

Canada vs Dow Chemicals, February 2023, Supreme Court, Case No. 40276

In 2022 the Federal Court of Canada ruled in favour of the Revenue Agency and dismissed Dow Chemicals’ appeal regarding the Tax Court’s jurisdiction to make a downward adjustment. The Federal Court held that the Tax Court could not overturn the Revenue Agency’s (Minister’s) opinion that a requested downward adjustment was inappropriate because the Tax Court’s jurisdiction is only to set aside, vary or remit an assessment to the Minister, whereas an opinion is not an assessment. According to the Federal Court, the jurisdiction to judicially review an opinion lies with the Federal Court. Following the Federal Court’s decision, Dow Chemicals filed an application for leave to appeal to the Supreme Court. Appellant DCC.pdf Respondent HMTK.pdf Appellant DCC.pdf Judgement of the Supreme Court In a judgment of 23 February 2023, the application for leave to appeal was granted and the question of jurisdiction will now ... Continue to full case
Malaysia vs Executive Offshore Shipping SDN BHD, December 2022, High Court, Case No WA-25-388-12/2021

Malaysia vs Executive Offshore Shipping SDN BHD, December 2022, High Court, Case No WA-25-388-12/2021

Executive Offshore Shipping SDN BHD is in the business of chartering offshore support vessels. It is related to another company, one Eagle High (L) Limited which is a ship-owning company registered in the special tax zone of Labuan where transfer pricing provisions were first introduced in 2020. Eagle High (L) Limited provided (i) charter hire of vessels and (ii) crew management services to Executive Offshore Shipping for the Years of Assessment – 2014 to 2016. In consideration for these services Executive Offshore Shipping paid a cost-plus mark-up rate of 35% as the charter hire and crew management fee. Following an audit the tax authorities asserted that Executive Offshore Shipping SDN BHD had underreported the its taxable income for FY 2014 to 2016. An assessment was issued where additional income of RM19,808,218.39 had been determined by reference to the arm’s length principle. The tax authorities rejected ... Continue to full case
Belgium vs Bosal International NV, November 2022, Court of Cassation, Case Nr. F.21.0189.N

Belgium vs Bosal International NV, November 2022, Court of Cassation, Case Nr. F.21.0189.N

The Court of Appeal rejected an appeal filed by Bosal International NV and decided that the tax authorities had lawfully applied article 207, second paragraph of the WIB92, on the abnormal or benevolent benefits which Bosal International NV had received from two related Dutch companies by transferring two receivables at their nominal value (above the market value) to those companies. Judgement of the Court of Cassation The Court of Cassation upheld the decision of the Court of Appeals. According to the Court, the text of Article 207(2) ITC 92 makes no distinction based on the tax residence of the benefit provider. The concept of “undeclared taxable income” within the meaning of Article 358 CIR 92 is compatible with the deduction prohibition on acquired abnormal or gratuitous benefits. Excerpt “It follows from these articles that the part of the result arising from abnormal or gratuitous advantages ... Continue to full case
Italy vs Quaker Italia Srl, November 2022, Supreme Administrative Court, Case No 34728/2022

Italy vs Quaker Italia Srl, November 2022, Supreme Administrative Court, Case No 34728/2022

Quaker Italia Srl is a non-exclusive distributor of Quaker products in Italy – lubricating oils and greases. It also carries out a minor manufacturing activity. An assessment was issued by the tax authorities in 2012 regarding the remuneration received for the distribution activities in FY 2007. The Tax authorities considered that the documentation provided by the company was contradictory and incomplete, and therefore recalculated the income using a (partially) different method (TNMM in the modified resale price version, instead of TNMM in the modified cost-plus version). This resulted in additional taxable income in the amount of Euro 1,180,447.00. A complaint was filed by Quaker with the Provincial Tax Commission. The Provincial Commission confirmed the legitimacy and effectiveness of the tax assessment. An appeal was then filed with the the Regional Tax Commission (CTR) of Lombardy. The Regional Tax Commission rejected the appeal and confirmed the ... Continue to full case
Hungary vs "IPC manufacturing KtF", November 2022, Supreme Court, Case No Kfv.VI.35.316/2022/8

Hungary vs “IPC manufacturing KtF”, November 2022, Supreme Court, Case No Kfv.VI.35.316/2022/8

The transfer pricing setup of a group was changed following a business restructuring, and “IPC manufacturing KtF” had deducted 4 invoices issued as a transfer pricing adjustment. The tax authorities disallowed the deduction, since the invoices did not cover any actual costs of materials for the year in question. An appeal was filed by “IPC manufacturing KtF” with the Court, where the assessment of the tax authorities was upheld. An appeal was then filed with the Supreme Court based on formalities of the decision issued by the Court of first instance. Judgement of the Supreme Court The Supreme Court upheld the decision of the Court of first instance and the assessment issued by the tax authorities. Excerpt “The Court of First Instance correctly ruled that the tax authority was correct in its finding that the value of the invoices could not be deducted as material ... Continue to full case
Czech Republic vs DFH Haus CZ s.r.o., November 2022, Supreme Administrative Court, Case No 4 Afs 98/2022-45

Czech Republic vs DFH Haus CZ s.r.o., November 2022, Supreme Administrative Court, Case No 4 Afs 98/2022-45

In 2013, DFH Haus CZ s.r.o. filed amended tax returns for 2006, 2010, and 2011, following the German tax authority’s adjustment of its transfer prices in 2006, in order to claim the resulting tax loss for 2006 and apply it against its tax liability in the Czech Republic for 2010 and 2011. The tax authorities disallowed these amendments. A complaint filed by DFH with the regional court was dismissed and an appeal was then filed with the Supreme Administrative Court. Judgement of the Court The Supreme Administrative Court rejected DFH’s appeal and upheld the decision of the tax authorities. Excerpts “[34] On the basis of the foregoing, the Supreme Court of Justice, like the Regional Court, considers that the complainant’s tax loss for 2006, as a relevant fact in terms of the reopening of proceedings, was incurred, assessed and could be deducted from the tax ... Continue to full case
Czech Republic vs DFH Haus CZ s.r.o., November 2022, Supreme Administrative Court, Case No 4 Afs 287/2020-54

Czech Republic vs DFH Haus CZ s.r.o., November 2022, Supreme Administrative Court, Case No 4 Afs 287/2020-54

In 2013, DFH Haus CZ s.r.o. filed amended tax returns for 2006, 2010, and 2011, following the German tax authority’s adjustment of its transfer prices in 2006, in order to claim the resulting tax loss for 2006 and apply it against its tax liability in the Czech Republic for 2010 and 2011. The tax authorities disallowed the amendments. A complaint filed by DFH with the district court was dismissed and an appeal was then filed with the Supreme Administrative Court. Judgement of the Court The Court rejected DFH’s arguments that the tax loss must be allowed under the Czech-German income tax treaty. DFH could not reduce its tax liabilities in the Czech Republic in 2010 and 2011 with the 2006 tax loss resulting from the German transfer pricing adjustment. The Court noted that the usual purpose of double taxation treaties is to regulate the place ... Continue to full case
Hong Kong vs Directors of Nam Tai Trading Company Limited, August 2022, Court of Appeal, Case FACV No. 1 of 2022

Hong Kong vs Directors of Nam Tai Trading Company Limited, August 2022, Court of Appeal, Case FACV No. 1 of 2022

The tax returns of Nam Tai Trading Company Limited (“NT Trading”) for the years 1996/97, 1997/98 and 1999/2000 were found by the tax authorities to be incorrect due to non arm’s length pricing of controlled transactions. Mr Koo and Mr Murakami, were directors of NT Trading at the time. Mr Koo signed the first and third of those returns, and Mr Murakami signed the second. NT Trading’s attempts to challenge the Inland Revenue Department’s assessments were unsuccessful. In 2013, the directors were assessed to additional tax under section 82A(1)(a) of the Inland Revenue Ordinance (Cap. 112) (the “Ordinance”) on the basis that the Returns were incorrect. At the relevant time, section 82A(1)(a) provided: “(1) Any person who without reasonable excuse— (a) makes an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either ... Continue to full case