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

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

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

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 ... Continue to full case

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

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

“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

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

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

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

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

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

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

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

A tax assessment had been issued for FY 2013 resulting in additional taxes of to CZK 227,162,210. At first the tax administration disputed that the applicant had purchased 1 TB SSDs for the purpose of earning, maintaining and securing income. It therefore concluded that the Starcom Internatioal had not proved that the conditions for tax deductions were met. On appeal, the tax administrator changed its position and accepted that all the conditions for tax deductions were met, but now instead concluded that Starcom Internatioal was a connected party to its supplier AZ Group Czech s.r.o. It also concluded that the transfer prices had been set mainly for the purpose of reducing the tax base within the meaning of Section 23(7)(b)(5) of the ITA. It was thus for the tax authorities to prove that Starcom Internatioal and AZ Group Czech s.r.o. (‘AZ’) were ‘otherwise connected persons’ ... Continue to full case

A Swiss company, Ashland Industries Europe GmbH, had not declared a presence in Spain for VAT purposes and did not charge VAT for local sales. However, the Swiss company used the resources of its Spanish subsidiary when performing these local sales of goods in Spain. On that basis, the Spanish tax authorities found that the company had a permanent establishment for in Spain for VAT purposes and issued an assessment. An appeal was filed by Ashland Industries, but the appeal was dismissed by the courts. The Spanish Supreme Court concluded that: “First. To determine whether a permanent establishment can be deemed to exist in the Spanish territory of application of VAT where the only transactions carried out subject to that tax are supplies of goods other than supplies of gas, electricity, heat or refrigeration. Second. If the answer to the previous question is in the ... Continue to full case

Atlas Copco Tanzania Ltd. is part of Atlas Copco Group, a conglomerate of multinational companies headquartered in Sweden. The group produces and sell compressors, vacuum solutions, generators, pumps, power tools etc. Apart from supplying generators in Tanzania on its own, Atlas Tanzania sold generators as an agent of its sister companies which had no presence in the country. For the latter type of sales, known as “indent sales”, Atlas Tanzania earned a commission. Being oblivious that the commission income attracted Value Added Tax (“VAT”), Atlas Tanzania did not file any VAT returns on indent sales until its external auditors, KPMG, informed it of the requirement. By then, Atlas Tanzania had posted in its sales ledgers commission income amounting to TZS. 134,413,682,281.00 for FY 2007 and 2008. Atlas Tanzania then accounted for VAT on the commission for the years 2007 and 2008 amounting to TZS. 5,692,574,000.00, ... Continue to full case

“P Services! provided services to a Peruvian consortium. In 2014, the parties entered into an interest-free loan agreement. According to the loan agreement, payment for the services performed in 2013 was going to be offset against the funds received under the agreement. The tax authorities found that the “loan arrangement”, in reality constituted advances for the services provided by “P Services”- According to the authorities the arrangement had been established for the purpose of avoiding VAT on the advances received for the services. Decision of the Tax Court The tax court issued a decision in favour of the tax authorities. Click here for English translation Click here for other translation ... Continue to full case

Following an audit the tax authorities issued a adjustment to BMW Hellas S.A. related to its pricing of imported cars. The adjustment was later annulled by the Administrative Court of Appeal. Not satisfied with this result, the tax authorities then filed an appeal with the Supreme Administrative Court. Judgement of the Supreme Administrative Court The Supreme Court dismissed the appeal of tax authorities and upheld the decision of the Administrative Court of Appeal. Excerpts “Because, as is clear from the above-mentioned provision of Article 137.C(C)(2) of the Customs Code, the customs authorities are not in breach of their obligations under Article 137.C(2) of the Customs Code. 1 of Law No. 3583/2007, smuggling, when importing a vehicle into the country, occurs where the non-payment or reduced payment of the tax or duty provided for by law is the result of the declaration of false information or ... Continue to full case

At issue was deduction of VAT on purported costs incurred for intra-group services, which had been deemed non-deductible for tax as well as VAT purposes by the Italien Tax Authorities, as the taxpayer had not been able to prove the effectiveness and relevance of these services. The Supreme Court found that in order for intra-group cost to be deductible (and VAT deductible) taxpayer must prove that, a real service have been received which is objectively determinable and adequately documented. This burden of proof had not been lifted by the taxpayer and VAT payments on the purported services were consequently non-deductible. Click here for English translation ... Continue to full case