Category: VAT and Customs Valuation

Czech Republic vs EVEREST servis s.r.o., September 2023, Regional Court, Case No 54 Af 6/2022 - 233

Czech Republic vs EVEREST servis s.r.o., September 2023, Regional Court, Case No 54 Af 6/2022 – 233

At issue was VAT and tax deduction for costs of media and advertising space that EVEREST allegedly purchased from Koukni and Concept s.r.o. and Concept s.r.o.. A tax assessment was issued to EVEREST based on (1) failure to prove the receipt of the supply of “media and advertising space” to the declared extent and (2) denial of the claimed right to deduct VAT as the tax administrator found that EVEREST knew or should have known that it had engaged in VAT fraud by participating in those arrangements. An appeal was filed by EVEREST claiming that various legal formalities had not been observed by the tax authorities i.e. the tax administrator was not competent to issue the decision at all, the decision suffers from defects which render it manifestly internally inconsistent or legally or factually unworkable; the decision is issued on the basis of another void ... Continue to full case
Czech Republic vs. Eli Lilly ČR, s.r.o., August 2023, Supreme Administrative Court, No. 6 Afs 125/2022 - 65

Czech Republic vs. Eli Lilly ČR, s.r.o., August 2023, Supreme Administrative Court, No. 6 Afs 125/2022 – 65

Eli Lilly ČR imports pharmaceutical products purchased from Eli Lilly Export S.A. (Swiss sales and marketing hub) into the Czech Republic and Slovakia and distributes them to local distributors. The arrangement between the Czech company and the Swiss company is based on a Service Contract in which Eli Lilly ČR is named as the service provider to Eli Lilly Export S.A. (the principal). Eli Lilly ČR was selling the products at a lower price than the price it purchased them for from Eli Lilly Export S.A. According to the company this was due to local price controls of pharmaceuticals. However, Eli Lilly ČR was also paid for providing marketing services by the Swiss HQ, which ensured that Eli Lilly ČR was profitable, despite selling the products at a loss. Eli Lilly ČR reported the marketing services as a provision of services with the place of ... Continue to full case
Argentina vs Materia Pampa S.A., April 2023, Tax Court, Case No INLEG-2023-48473748-APN-VOCXXI#TFN

Argentina vs Materia Pampa S.A., April 2023, Tax Court, Case No INLEG-2023-48473748-APN-VOCXXI#TFN

The Argentinian company Materia Pampa S.A. exported products to a Brazilian company, Companhia De Bedidas Das Americas in Brazil (Ambev), via a related party in Uruguay, Maltería Uruguay S.A. There was a significant difference between the price declared on export to Uruguay and the price used for the subsequent final shipment to Brazil. An assessment was made by the tax/customs authorities, which resulted in an upward adjustment of the price received for the products from the related party in Uruguay, which in turn resulted in additional taxes and VAT. The price adjustment was based on the guidance provided in the OECD TPG, and in relation to the application of the arm’s length principle in determining prices for customs purposes, reference was made to the guidance provided in paragraph 1.137 of the 2017 TPG, which states. “The arm’s length principle is broadly applied by many customs ... Continue to full case
Argentina vs BASF Argentina S.A., February 2023, Tax Court, Case No TFN 39.933-A

Argentina vs BASF Argentina S.A., February 2023, Tax Court, Case No TFN 39.933-A

A local manufacturer – BASF Argentina S.A. – belonging to the German multinational group – BASF – specialized in chemical products which it produced and sold. For these activities it used imported and national inputs that it transformed through licensed industrial procedures owned by companies of the same group. It had signed 6 technology transfer and trademark use license agreements (CTT) with three related companies, under which it paid a fee for the sale of products manufactured in the country with the licensed technologies and trademarks. BASF Argentina S.A. also imported finished products with the same brands, but only for resale in the country. It claimed that no royalties were paid for these products. The customs authority objected to the non-inclusion of royalties in the import value. Judgement of the Tax Court The Court found that the royalties paid were also part of the value ... Continue to full case
Czech Republic vs Surprise Drinks a. s., January 2023, Regional Court , Case No 25-Af-17/2021

Czech Republic vs Surprise Drinks a. s., January 2023, Regional Court , Case No 25-Af-17/2021

Surprise Drinks a. s. imports plastic toys from China, generally inspired by animated films (‘the imported goods’), which it added as a gift to a drink sold by it (‘the finished product’). In its customs declarations it did not include royalties paid in the value of the imported toys. According to the customs office, the royalty/licence payments should have been included and therefore the customs office decided to impose a duty of CZK 50 541. An appeal was filed with the Regional Court. According to Surprise Drinks a. s., the customs authorities had erred in its interpretation of the Customs Code of the European Union. It follows from the wording of that provision itself that royalties form part of the customs value of goods only in so far as they relate to the goods being valued. However, it is only the final product, i.e. the ... Continue to full case
Czech Republic vs. Eli Lilly ČR, s.r.o., December 2022, Supreme Administrative Court, No. 7 Afs 279/2021 - 65

Czech Republic vs. Eli Lilly ČR, s.r.o., December 2022, Supreme Administrative Court, No. 7 Afs 279/2021 – 65

Eli Lilly ČR imports pharmaceutical products purchased from Eli Lilly Export S.A. (Swiss sales and marketing hub) into the Czech Republic and Slovakia and distributes them to local distributors. The arrangement between the local company and Eli Lilly Export S.A. is based on a Service Contract in which Eli Lilly ČR is named as the service provider to Eli Lilly Export S.A. (the principal). Eli Lilly ČR was selling the products at a lower price than the price it purchased them for from Eli Lilly Export S.A. According to the company this was due to local price controls of pharmaceuticals. At the same time, Eli Lilly ČR was also paid for providing marketing services by the Swiss HQ, which ensured that Eli Lilly ČR was profitable, despite selling the products at a loss. Eli Lilly ČR reported the marketing services as a provision of services ... Continue to full case
Germany vs "Import GmbH", October 2022, FG München, Case No 14 K 588/20

Germany vs “Import GmbH”, October 2022, FG München, Case No 14 K 588/20

The customs value declared by “Import GmbH” of the goods imported from related parties X, Y and Z was in dispute. In the course of a customs audit, the customs office (Hauptzollamt, HZA) found that Y had invoiced “Import GmbH” for subsequent debit amounts of EUR (…) for 2015, EUR (…) for 2016 and EUR (…) for 2017. These were based on a Distribution Agreement of (…) concluded between “Import GmbH” and Y, according to which “Import GmbH” undertook to purchase products from the latter and to sell them in the defined distribution area. With the 1st Supplementary Agreement of (…), supplies from affiliated companies of the group company were also included in this agreement and thus, inter alia, also the supplies from Z. With the second supplementary agreement of the same date, it was stipulated that “Import GmbH” should receive an “agreed margin” which ... Continue to full case
Germany vs "H-Customs GmbH", May 2022, Bundesfinanzhof, Case No VII R 2/19

Germany vs “H-Customs GmbH”, May 2022, Bundesfinanzhof, Case No VII R 2/19

H-Customs GmbH – the applicant and appellant – is a subsidiary of H, Japan. In the period at issue, from 17 October 2009 to 30 September 2010, H-Customs GmbH imported more than 1,000 consignments of various goods from H, which it had cleared for free circulation under customs and tax law at the defendant HZA (Hauptzollamt – German Customs Authorities). H-Customs GmbH declared the prices invoiced to it by H Japan as the customs value. Some of the imported articles were duty-free; for the articles that were not duty-free, the HZA imposed customs duties of between 1.4 % and 6.7 % by means of import duty notices. In 2012, H-Customs GmbH applied to the HZA for a refund of customs duties for the goods imported during the period at issue in the total amount of… €. It referred to an Advance Pricing Agreement (APA) concluded ... Continue to full case
Korea vs "IP developer", June 2022, Tax Court, Case No 2022-0014

Korea vs “IP developer”, June 2022, Tax Court, Case No 2022-0014

The issue was whether “technical fees” received after a purported “transfer of patent rights” instead constituted business income – royalties – earned from continuous and recurring activities for profit and therefore subject to a higher income tax and VAT. During an audit, the tax authority found that “IP developer” had entered into a “technology transfer agreement” with a related party to transfer patent rights on four occasions between 2008 and 2020. Upon entering into the agreement, “IP developer” was to receive a “technology fee” of 5% of the annual sales of the subject technology. “IP developer” had registered a total of 78 patents, 8 design rights and 15 trademark rights, and had also entered license agreements with third parties and received income from these agreements in the form of royalty. On that basis the tax authorities considered that “IP developer” was engaged in the continuous ... Continue to full case
Greece vs "VAT Ltd.", May 2022, Tax Court, Case No 2074/2022

Greece vs “VAT Ltd.”, May 2022, Tax Court, Case No 2074/2022

This case deals with VAT treatment of disallowed deductions for intra-group services. Following an audit, an adjustment of the taxable income was issued to “VAT Ltd.” by the tax authorities where intra-group services had been disallowed and VAT had been adjusted as a result. “VAT Ltd.” disagreed with the adjustment and filed an appeal. Judgement of the Tax Court The Tax Court upheld the assessment of the tax authorities. Click here for English translation gr-ded-ath-2074_2022 ... Continue to full case
Costa Rica vs British Tobacco Centroamérica S.A. March 2022, Supreme Court, Case No 750-2022

Costa Rica vs British Tobacco Centroamérica S.A. March 2022, Supreme Court, Case No 750-2022

The tax authorities had started investigating a sales contract that British Tobacco Centroamérica S.A. had with a related company abroad for the import of goods. The historical price of the imported goods was compared to the price contained in the later sales contract. In the customs forms, the company declared one value, but in its invoices it recorded another value for the same products. The tax auditor discovered that the sales contract had a clause extending its scope to the provision of consultancy services. The company reported during the audit that the supplying company played a central role in the marketing of products that the local company made by assisting it in the elaboration of marketing studies, sales campaigns and quality studies. On this background an adjustment was issued for additional withholding tax for source income in the form of consultancy services provided by the ... Continue to full case
Portugal vs "A S.A.", March 2022, CAAD - Administrative Tribunal, Case No : 213/2021-T

Portugal vs “A S.A.”, March 2022, CAAD – Administrative Tribunal, Case No : 213/2021-T

A S.A. is 51% owned by B SA and 49% by C Corp. A S.A is active in development of energy efficiency projects. In 2015 A S.A took out loans from B and C at an annual interest rate of 3.22xEuribor 12 months, plus a spread of 14%. A S.A had also paid for services to related party D. The tax authorities issued an assessment related to the interest rate on the loan and the service purportedly received and paid for. A complaint was filed by A S.A. with the Administrative Tribunal (CAAD). Judgement of the CAAD The complaint of A S.A was dismissed and the assessment upheld. Excerpts regarding the interest rate “Now, regarding the first argument, it falls immediately by the base, since the Applicant has not proved that it had made any effort to finance itself with the bank and that this ... Continue to full case
Greece vs "Marine Fuel Ltd", January 2022, Dispute Settlement Board, Case No 36/2022

Greece vs “Marine Fuel Ltd”, January 2022, Dispute Settlement Board, Case No 36/2022

“Marine Fuel Ltd” was audited for FY 2015 and an assessment was issued by the tax authorities, where the taxable income had been increased due to a transfer pricing adjustment. The tax authorities had dismissed the CUP method chosen by the group and instead applied the transactional net margin method (TNMM). Not satisfied with the adjustment, a complaint was filed by “Marine Fuel Ltd” with the Dispute Settlement Board. Judgement of the Board The Board dismissed the complaint of “Marine Fuel Ltd” and upheld the assessment issued by the tax authorities. Excerpts “As some separate transactions carried out between associated enterprises may need to be assessed as a single transaction in order to determine whether the arm’s length principle is respected, other transactions between these enterprises that were invoiced as a package may need to be assessed separately. A group may combine a package of ... Continue to full case
Italy vs "VAT ALFA S.p.A.", December 2021,  Tax Ruling of the Italian Revenue Agency, Case No 884/2021

Italy vs “VAT ALFA S.p.A.”, December 2021, Tax Ruling of the Italian Revenue Agency, Case No 884/2021

A ruling was issued by the Italian Revenue Service on the following question on the VAT treatment of Transfer Pricing adjustments. 1) an internal CUP (Compared Uncontrolled Price) methodology is used, on the basis of which, net of appropriate adjustments, the price of goods charged by ALFA S.p.A. to its EU affiliates is compared with the price applied by the same company in transactions with independent third parties. The adjustments applied to the price identified by the CUP method, as clarified by the same applicant in the note forwarded at the time of submitting the supplementary documentation, consist of a discount of XX on the price of finished products that can be applied to independent third parties; this last reduction would be attributable to the higher costs borne by the subsidiaries compared to third party resellers; 2) at the end of the year, a corroborative ... Continue to full case
Brazil vs GKN do Brasil LTDA, December 2021, Administrative Court of Appeal (CARF), Case  No. 11080.724128/2015-21

Brazil vs GKN do Brasil LTDA, December 2021, Administrative Court of Appeal (CARF), Case No. 11080.724128/2015-21

In this case the assessed company had imported goods from a related party. It did not fail to declare the relation to the exporter, but indicated in the completion of its import declarations that this relation did not influence the price. It therefore adopted the first method of customs valuation; the transaction value, to establish the basis for calculation and collection of taxes. The authorities found evidence that the relation did influence the declared price and on that basis ruled out the use of the first method for customs valuation. In compliance with Brazilian customs legislation, the tax authorities started to evaluate the possibility of using other customs valuation methods. The second (identical goods), third (similar goods), fourth (deductive) and fifth (computed goods) methods were not found applicable, which left the sixth and final method. The sixth method is a last resort method where the ... Continue to full case
Argentina vs Malteria Pampa SA, October 2021, Federal Administrative Court, Case No TF 35123-A

Argentina vs Malteria Pampa SA, October 2021, Federal Administrative Court, Case No TF 35123-A

Malteria Pampa S.A in Argentina exported malt to a related intermediary in Uruguay that in turn sold on the goods to the brewery in Brazil at a higher price. The tax authorities applied the Sixth method and issued an assessment where the export price was determined based on the latter price used in the transaction with the brewery in Brazil. Furthermore a substantial fine was issued to the Malteria Pampa S.A. for non compliance. In February 2019 the Tax Court decided in favour of the tax authorities. “That the factual and legal points considered by the customs verification – corroborated in this pronouncement – complied with the application parameters of the TP rules invoked in the Technical Report, forming a solid conviction that the transactional prices of the sale declared in the field “Merchandise Value” of the PE 07-003-EC01-004994-P and PE N° 07-003- EC01-004995-Z of ... Continue to full case
Kenya vs PE of Man Diesel, August 2021, High Court of Kenya, Income Tax Appeal No. E125 OF 2020

Kenya vs PE of Man Diesel, August 2021, High Court of Kenya, Income Tax Appeal No. E125 OF 2020

A Permanent Establishment (PE) in Kenya of MAN Diesel and Turbo SE Germany (MAN) entered into a consortium with a firm called MPG Services to engineer, procure and construct an 87 MW generating capacity thermal power plant on behalf of Thika Power Ltd. The role of MAN’s Kenyan PE in the project was mobilization, engineering and design, reservation of the diesel sets, and steam turbine and other start-up costs associated with its part of the works which included supervision of the assembly and installation of engines and commissioning the engines. MAN Germany was to provide for the materials up to the port of export and the PE was to assist in the onshore part which included supervision of the assembly and installation work as well as commissioning the work but did not include supply of equipment. In 2015, the tax authorities initiated an audit which ... Continue to full case
France vs. SARL SRN Métal, May 2021, CAA, Case No. 19NC03729

France vs. SARL SRN Métal, May 2021, CAA, Case No. 19NC03729

SARL SRN Métal’s business is trading in industrial metal and steel products. Following an audit of the company for FY 2011 to 2012 and assessment was issued related to VAT, Transfer Pricing and Withholding Tax. In regards to transfer pricing, the administration considered that (1) the sales of goods made by SRN Métal to B-Lux Steel, established in Luxembourg, were invoiced at a lower price than that charged to the company’s other customers and (2) that commissions paid to Costa Rica – a privileged tax regime – were not deductible as SRN Metal did not provided proof that the expenses corresponded to real operations and that they are not abnormal or exaggerated. The company requested the administrative court of Strasbourg to discharge the assessments. This request was rejected by the court in a judgement issued 29 October 2019. This decision of the administrative court was ... Continue to full case
South Africa vs Levi Strauss SA (PTY) LTD, April 2021, Supreme Court of Appeal, Case No (509/2019) [2021] ZASCA 32

South Africa vs Levi Strauss SA (PTY) LTD, April 2021, Supreme Court of Appeal, Case No (509/2019) [2021] ZASCA 32

Levi Strauss South Africa (Pty) Ltd, has been in a dispute with the African Revenue Services, over import duties and value-added tax (VAT) payable by it in respect of clothing imports. The Levi’s Group uses procurement Hubs in Singapore and Hong Kong but channeled goods via Mauritius to South Africa, thus benefiting from a favorable duty protocol between Mauritius and South Africa. Following an audit, the tax authorities issued an assessment in which it determined that the place of origin certificates issued in respect of imports from countries in the South African Development Community (SADC) and used to clear imports emanating from such countries were invalid, and therefore disentitled Levi SA from entering these goods at the favorable rate of zero percent duty under the Protocol on Trade in the Southern African Development Community (SADC) Region (the Protocol). The tax authorities also determined that the ... Continue to full case
Norway vs New Wave Norway AS, March 2021, Court of Appeal, Case No LB-2020-10664

Norway vs New Wave Norway AS, March 2021, Court of Appeal, Case No LB-2020-10664

New Wave Norway AS is a wholly owned subsidiary of the Swedish New Wave Group AB. The group operates in the wholesale market for sports and workwear and gift and promotional items. It owns trademark rights to several well-known brands. The sales companies – including New Wave Norway AS – pay a concept fee to New Wave Group AB, which passes on the fee to the concept-owning companies in the Group. All trademark rights owned by the group are located in a separate company, New Wave Group Licensing SA, domiciled in Switzerland. For the use of the trademarks, the sales companies pay royalties to this company. There is also a separate company that handles purchasing and negotiations with the Asian producers, New Wave Group SA, also based in Switzerland. For the purchasing services from this company, the sales companies pay a purchasing fee (“sourcing fee”) ... Continue to full case
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