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Category: Tax Avoidance Schemes

Tax avoidance schemes generally refer to complex tax arrangements setup by multinational enterprices to shift profits from high-tax jurisdiction to low-tax jurisdictions.
A difficult destinction has to be made between legal tax planning, abusive tax avoidance schemes which may or may not be legal, and illegal tax evation/sham transactions and arrangements.
It is generally the case that abusive/agressive tax avoidance schemes and arrangements, “colourable devices”, “dubious methods” and “fully artificial arrangements” set up with the primary or sole purpose of avoiding taxes are not permissible – even if the transactions are otherwise individually within the letter of the law.
Illegal tax evasion – fraud or sham transactions and arrangements – are usually considered criminal and prosecuted as such.

Canada vs Cameco Corp., October 2018, Tax Court of Canada, Case No 2018 TCC 195

Canadian mining company, Cameco Corp., sells uranium to a wholly owned trading hub, Cameco Europe Ltd., registred in low tax jurisdiction, Switzerland, which then re-sells the uranium to independent buyers. The parties had entered into a series of controlled transactions related to this activity and as a result the Swiss trading hub, Cameco Europe Ltd., was highly profitable. Following an audit, the Canadian tax authorities issued a transfer pricing tax assessment covering years 2003, 2005, 2006, […]

European Commission concludes on investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations, September 2018

Following an investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations since 2015, the EU Commission concluded that the tax rulings granted by Luxembourg to McDonald’s in 2009 did not provide illegal state aid. According to the Commission, the law allowing McDonald’s to escape taxation on franchise income in Luxembourg – and the US – did not amount to an illegal selective advantage under EU law. The double non-taxation of McDonald’s franchise […]

Major US MNE’s in Ireland

Major US MNE’s with regional Headquarters in Ireland for European business activities. The corporation tax rate in Ireland is only 12.5%. However to further sweeten the deal for MNE’s, Ireland has been known to offer special tax deals to MNE’s resulting in much lower effective tax rates. Ireland provides MNEs with both low tax centers for European activities and conduit holding companies serving as hubs for transferring profits and capital to low tax jurisdictions such […]

Russia vs Togliattiazot, September 2018, Russian Arbitration Court, Case No. No. А55-1621 / 2018

A Russian company, Togliattiazot, supplied ammonia to the external market through a Swiss trading hub, Nitrochem Distribution AG. The tax authority found that the selling price of the ammonia to Nitrochem Distribution AG had not been determined by Togliattiazot in accordance with the arm’s length principle but had been to low. Hence, a transfer pricing assessment was issued where the CUP method was applied. At first, the company argued that Togliattiazot and Nitrochem Distribution AG […]

US vs Pacific management Group, August 2018, US Tax Court Case, Memo 2018-131

This case concerned a tax scheme where taxable income was eliminated using factoring and management fees to shift profits. The Tax Court held that the scheme was in essence an attempt to eliminate the taxes. Factoring and management fees were not deductible expenses but rather disguised distributions of corporate profits and generally currently taxable to the individual shareholders as constructive dividends or as income improperly assigned to the corporations. In the TC Memo interesting views on the arm’s […]

European Commission’s investigations into member state transfer pricing and tax ruling practices

Since June 2013, the European Commission has been investigating tax ruling practices of EU Member States. A Task Force was set up in summer 2013 to follow up on allegations of favourable tax treatment of certain companies, in particular in the form of unilateral tax rulings. The Treaty on the Functioning of the European Union (“TFEU”) provides that “any aid granted by a Member State or through State resources in any form whatsoever which distorts […]

India vs. Vodafone India Services Pvt Ltd, Jan 2018, ITA No.565 Ahd 2017

The 2018 Vodafone case from India – whether termination of option rights under an agreement can be treated as a “deemed international transaction” under section 92B(2) of the Income Tax Act. Vodafone India Services had a call option to buy shares in SMMS Investment Pvt Ltd — which held 5.11% equity capital of the Vodafone India through a web of holdings for 2.78 crore if the fair market value of these shares was less than […]

India vs Google, Oct. 2017, Income Tax Appellate Tribunal

Google Ireland licenses Google AdWords technology to its subsidiary in India and several other countries across the world. The Tax Tribunal in India found that despite the duty of Google India to withhold tax at the time of payment to Google Ireland, no tax was withheld. This was considered tax evasion, and Google was ordered to pay USD 224 million. The case has now been appealed by Google to the Supreme Court of India. Share:

UK vs. BNP PARIBAS, September 2017, FIRST-TIER TRIBUNAL TAX CHAMBER, TC05941

The issues in this case was: Whether the price of purchase of right to dividends were deductible. Whether the purchase and sale of right to dividends was trading transaction in course of Appellant’s trade. Whether the purchase price expenditure incurred wholly and exclusively for purposes of the trade. Whether HMRC were permitted to argue point in relation to section 730 ICTA that was not raised in closure notice and which they stated they were not pursuing Whether the price […]

Australian Parliament Hearings – Tax Avoidance

In a public hearing held 22 August 2017 in Sydney Australia by the Economics References Committee, tech companies IBM, Microsoft, and Apple were called to the witnesses stand to explain about tax avoidance schemes – use of “regional headquarters” in low tax jurisdictions (Singapore, Ireland and the Netherlands) to avoid or reduce taxes. Follow the ongoing Australian hearings into corporate tax avoidance on this site: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th Transcript from the hearing:     Share:

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