Category: Withholding Tax (WHT)

Brazil vs AES SUL Distribuidora Gaúcha de Energia S/A, August 2021, Superior Tribunal de Justiça, CaseNº 1949159 - CE (2021/0219630-6)

Brazil vs AES SUL Distribuidora Gaúcha de Energia S/A, August 2021, Superior Tribunal de Justiça, CaseNº 1949159 – CE (2021/0219630-6)

AES SUL Distribuidora Gaúcha de Energia S/A is active in footwear industry. It had paid for services to related foreign companies in South Africa, Argentina, Canada, China, South Korea, Spain, France, Holland, Italy, Japan, Norway, Portugal and Turkey. The tax authorities were of the opinion that withholding tax applied to these payments, which they considered royalty, and on that basis an assessment was issued. Not satisfied with this assessment AES filed an appeal, which was allowed by the court of first instance. An appeal was then filed by the tax authorities with the Superior Tribunal. Judgement of the Superior Tribunal de Justiça The court upheld the decision of the court of first instance and dismissed the appeal of the tax authorities. Excerpts “Therefore, the income from the rendering of services paid to residents or domiciled abroad, in the cases dealt with in the records, is ... Continue to full case
Switzerland vs "A SA", July 2021, Federal Supreme Court, Case No 2C_80/2021

Switzerland vs “A SA”, July 2021, Federal Supreme Court, Case No 2C_80/2021

In this case, the Swiss tax authorities had refused to refund A SA withholding tax on an amount of the so-called distributable reserves. The refund was denied based on the Swiss “Old Reserves-doctrin”. “…the doctrine relates the existence of the practice of the Federal Tax Administration of 15 November 1990, known as the “purchase of a full wallet” (“Kauf eines vollen Portemonnaies” or the “old reserves” practice… According to this practice, “tax avoidance is deemed to have occurred when a holding company based in Switzerland buys all the shares of a company based in Switzerland with substantial reserves from persons domiciled (or having their seat) abroad at a price higher than their nominal value, …” The doctrin is applied by the tax authorities based on a schematic asset/liability test: if there are distributable reserves/retained earnings prior to the transfer of shares from a jurisdiction with ... Continue to full case

Luxembourg vs “Lux PPL SARL”, July 2021, Administrative Tribunal, Case No 43264

Lux PPL SARL received a profit participating loan (PPL) from a related company in Jersey to finance its participation in an Irish company. The participation in the Irish company was set up in the form of debt (85%) and equity (15%). The profit participating loan (PPL) carried a fixed interest of 25bps and a variable interest corresponding to 99% of the profits derived from the participation in the Irish company, net of any expenses, losses and a profit margin. After entering the arrangement, Lux PPL SARL filed a request for an binding ruling with the Luxembourg tax administration to verify that the interest charged under the PPL would not qualify as a hidden profit distribution subject to the 15% dividend withholding tax. The tax administration issued the requested binding ruling on the condition that the ruling would be terminate if the total amount of the interest charge ... Continue to full case
Denmark vs NETAPP ApS and TDC A/S, May 2021, High Court, Cases B-1980-12 and B-2173-12

Denmark vs NETAPP ApS and TDC A/S, May 2021, High Court, Cases B-1980-12 and B-2173-12

On 3 May 2021, the Danish High Court ruled in two “beneficial owner” cases concerning the question of whether withholding tax must be paid on dividends distributed by Danish subsidiaries to foreign parent companies. The first case – NETAPP Denmark ApS – concerned two dividend distributions of approx. 566 million DKK and approx. 92 million made in 2005 and 2006 by a Danish company to its parent company in Cyprus. The National Tax Court had upheld the Danish company in that the dividends were exempt from withholding tax pursuant to the Corporation Tax Act, section 2, subsection. 1, letter c, so that the company was not obliged to pay withholding tax. The Ministry of Taxation brought the case before the courts, claiming that the Danish company should include – and thus pay – withholding tax of a total of approx. 184 million kr. The second ... Continue to full case
Poland vs "BO zoo", April 2021, Supreme Administrative Court, Cases No II FSK 240/21

Poland vs “BO zoo”, April 2021, Supreme Administrative Court, Cases No II FSK 240/21

The shareholder of “BO zoo” is a German company. The German parent held 100% of the shares of “BO zoo” continuously for more than 2 years. The German parent’s ownership of the shares was based on title. “BO zoo” asked the Tax Chamber whether, in order to apply the exemption provided for in Article 22(4) of the CIT Act, it is obliged to verify whether the German parent meets the definition of a beneficial owner of dividends within the meaning of Article 4a(29a) of the CIT Act. “BO zoo” took the position that no provision of the CIT Act makes the application of the exemption from CIT under Article 22(4) of the CIT Act conditional on the company receiving the dividend being the beneficial owner of the dividend. The Tax Chamber disagreed, arguing that the verification of the beneficial owner is part of the due ... Continue to full case
India vs Concentrix Services & Optum Global Solutions Netherlands B.V., March 2021, High Court, Case No 9051/2020 and 2302/2021

India vs Concentrix Services & Optum Global Solutions Netherlands B.V., March 2021, High Court, Case No 9051/2020 and 2302/2021

The controversy in the case of India vs Concentrix Services Netherlands B.V. & Optum Global Solutions International Netherlands B.V., was the rate of withholding tax to be applied on dividends paid by the Indian subsidiaries (Concentrix Services India Private Limited & Optum Global Solutions India Private Limited) to its participating (more than 10% ownership) shareholders in the Netherlands. The shareholders in the Netherlands held that withholding tax on dividends should be applied by a rate of only 5%, whereas the Indian tax authorities applied a rate of 10%. The difference in opinions relates to interpretation of a protocol to the tax treaty between India and the Netherlands containing an most favoured nation clause (MFN clause). MFN clauses provides that the parties to the treaty (here India and the Netherlands) are obliged to provide each other with a treatment no less favourable than the treatment they ... Continue to full case
Philippines vs Snowy Owl Energy Inc, March 2021, Tax Court, CTA CASE No. 9618

Philippines vs Snowy Owl Energy Inc, March 2021, Tax Court, CTA CASE No. 9618

In 2013, Snowy Owl Energy Inc entered into a Consultancy Agreement (Subconsultant Services Agreement) with Rolenergy Inc. – a Hong Kong-based corporation organized and registered in the British Virgin Islands. Based on the Agreement, Rolenergy would serve as Snowy Owl Energy Inc’s sub-consultant. The tax authorities issued an assessment for deficiency income tax (IT), final withholding tax (FWT) and compromise penalty in relation to the sub-consultant fees it paid for taxable year 2013. Judgement of the Tax Court The Court decided in favour of Snowy Owl Energy Inc. Section 23(F)36 in relation to Section 42(C)(3)37 of the NIRC of 1997, as amended, provides that a non-resident foreign corporation is taxable only for income from sources within the Philippines, and does not include income for services performed outside the Philippines. Excerpts: “Indubitably, the payments made in exchange for the services rendered in Hong Kong are income ... Continue to full case
India vs Engineering Analysis Centre of Excellence Private Limited, March 2021, Supreme Court, Case No  8733-8734 OF 2018

India vs Engineering Analysis Centre of Excellence Private Limited, March 2021, Supreme Court, Case No 8733-8734 OF 2018

At issue in the case of India vs. Engineering Analysis Centre of Excellence Private Limited, was whether payments for purchase of computer software to foreign suppliers or manufacturers could be characterised as royalty payments. The Supreme Court held that such payments could not be considered payments for use of the underlying copyrights/intangibles. Hence, no withholding tax would apply to these payments for the years prior to the 2012. Furthermore, the 2012 amendment to the royalty definition in the Indian tax law could not be applied retroactively, and even after 2012, the definition of royalty in Double Tax Treaties would still override the definition in Indian tax law. Excerpt from the conclusion of the Supreme Court “Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment , it is clear that there is no obligation on the ... Continue to full case
Netherlands vs "Share Owner/Lender", February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

Netherlands vs “Share Owner/Lender”, February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

The interested party bought AEX-listed shares, sold three-month futures based on those shares through its shareholder/broker [D], and lent the shares to [D] (stock lending). It received cash collateral ($ deposits as collateral) and a stock lending fee for its lending. According to the interested party, the shares always briefly reverted to its ownership around their dividend dates through registration in the interested party’s securities account with the French custodian bank on the basis of legal transactions between its shareholder [D] and it, represented by [D]. In dispute is the question whether the interested party is entitled to a set-off of € 39,249,246 in Dutch dividend tax withheld from the dividends on the shares lent by her. Did she receive the dividends (was she the beneficial owner?) and if so, was she also the ultimate beneficiary of the dividend? Also in dispute is whether the ... Continue to full case
Netherlands vs "Share Owner/Lender", February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

Netherlands vs “Share Owner/Lender”, February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

The interested party bought AEX-listed shares, sold three-month futures based on those shares through its shareholder/broker [D], and lent the shares to [D] (stock lending). It received cash collateral ($ deposits as collateral) and a stock lending fee for its lending. According to the interested party, the shares always briefly reverted to its ownership around their dividend dates through registration in the interested party’s securities account with the French custodian bank on the basis of legal transactions between its shareholder [D] and it, represented by [D]. In dispute is the question whether the interested party is entitled to a set-off of € 39,249,246 in Dutch dividend tax withheld from the dividends on the shares lent by her. Did she receive the dividends (was she the beneficial owner?) and if so, was she also the ultimate beneficiary of the dividend? Also in dispute is whether the ... Continue to full case
Switzerland vs "Contractual Seller SA", January 2021, Federal Supreme Court, Case No 2C_498/2020

Switzerland vs “Contractual Seller SA”, January 2021, Federal Supreme Court, Case No 2C_498/2020

C. SA provides “services, in particular in the areas of communication, management, accounting, management and budget control, sales development monitoring and employee training for the group to which it belongs, active in particular in the field of “F”. C. SA is part of an international group of companies, G. group, whose ultimate owner is A. The G group includes H. Ltd, based in the British Virgin Islands, I. Ltd, based in Guernsey and J. Ltd, also based in Guernsey. In 2005, K. was a director of C. SA. On December 21 and December 31, 2004, an exclusive agreement for distribution of “F” was entered into between L. Ltd, on the one hand, and C. SA , H. Ltd and J. Ltd, on the other hand. Under the terms of this distribution agreement, L. Ltd. undertook to supply “F” to the three companies as of January ... Continue to full case
El Salvador vs "E-S Cosmetics Corp", December 2020, Tax Court, Case R1701011.TM

El Salvador vs “E-S Cosmetics Corp”, December 2020, Tax Court, Case R1701011.TM

“Cosmetics Corp” is active in wholesale of medicinal products, cosmetics, perfumery and cleaning products. Following an audit the tax authorities issued an assessment regarding the interest rate on loans granted to the related parties domiciled in Cayman Islands and Luxembourg. An appeal was filed by the company. Judgement of the Tax Court The court partially upheld the assessment. Excerpt “In this sense, it is essential to create a law that contains the guidelines that the OECD has established to guarantee the principle of full competition in transactions carried out between national taxpayers with related companies, for the purpose of applying the technical methods and procedures that they provide; The express reference made by Article 62-A of the TC cannot be considered as a dimension of the principle of relative legal reserve, insofar as there is no full development of the methods or procedures contained therein, ... Continue to full case
Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

The tax authorities had issued an assessment according to which royalty payments from Colgate Palmolive España S.A (CP España) to Switzerland were not considered exempt from withholding taxes under the Spanish-Swiss DTA since the company in Switzerland was not the Beneficial Owner of the royalty-income. The assessment was set aside by the National Court in a decision issued in November 2018. The Supreme court were to clarify the conformity with the law of the judgement of the Audiencia Nacional, following in the wake of the order of admission which, in a similar manner to that proposed in appeal no. 5448/2018, ruled in favour of the taxpayer on 3 February last, asks the following questions. a) to clarify the objective and temporal limits of the so-called dynamic interpretation of the DTAs signed by the Kingdom of Spain on the basis of the OECD Model Convention – ... Continue to full case
Tanzania vs African Barrick Gold PLC, August 2020, Court of Appeal, Case No. 144 of 2018, [2020] TZCA 1754

Tanzania vs African Barrick Gold PLC, August 2020, Court of Appeal, Case No. 144 of 2018, [2020] TZCA 1754

AFRICAN BARRICK GOLD PLC (now Acacia Mining Plc), the largest mining company operating in Tanzania, was issued a tax bill for unpaid taxes, interest and penalties for alleged under-declared export revenues. As a tax resident in Tanzania, AFRICAN BARRICK GOLD was asked to remit withholding taxes on dividend payments amounting to USD 81,843,127 which the company allegedly made for the years 2010, 2011, 2012 and 2013 (this sum was subsequently reduced to USD 41,250,426). AFRICAN BARRICK GOLD was also required to remit withholding taxes on payments which the mining entities in Tanzania had paid to the parent, together with payments which was made to other non-resident persons (its shareholders) for the service rendered between 2010 up to September 2013. AFRICAN BARRICK GOLD argued that, being a holding company incorporated in the United Kingdom, it was neither a resident company in Tanzania, nor did it conduct ... Continue to full case
Tanzania vs Mantra (Tanzania) Limited, August 2020, Court of Appeal, Case No 430 of 2020

Tanzania vs Mantra (Tanzania) Limited, August 2020, Court of Appeal, Case No 430 of 2020

Mantra Limited is engaged in mineral exploration in Tanzania. In carrying out its business, it procured services from non-resident service providers mostly from South Africa. In 2014, Mantra Limited wrote to the tax authorities requesting for a refund of withholding taxes of USD 1,450,920.00 incorrectly paid in relation to services that were performed outside Tanzania by non-resident service providers for the period between July, 2009 and December, 2012. The tax authorities refused the request maintaining that, the services in question were rendered in Tanzania and Article 7 of the DTA was irrelevant in as much as it was limited to business profits and not business transactions. Unsuccessfull appeals were filed by Mantra and in 2020 the case ended up in the Court of Appeal where Mantra argued based on the following grounds:- 1. That the Tax Revenue Appeals Tribunal grossly erred in law by holding ... Continue to full case
Peru vs. "TELE SA", July 2020, Tax Court, Case No 03306-9-2020

Peru vs. “TELE SA”, July 2020, Tax Court, Case No 03306-9-2020

“TELE SA” had applied a 15% withholding tax rate to lease payments for telecommunications equipment purportedly provided by a Chilean company that had been established by the Mexican parent of the “TELE” group. TELE SA claimed the payments qualified as royalties under Article 12 of the Peru-Chile double tax treaty. The Peruvian Tax Authority found the reduced 15 % rate did not apply to the lease payments because the Chilean entity was not the beneficial owner of the royalty payments. Hence an assessment was issued where withholding taxes had been calculated using a 30% rate under Peruvian domestic tax legislation. An appeal was filed with the Tax Court. Judgement of the Tax Court The Tax Court upheld the decision of the tax authorities and dismissed the appeal of “TELE SA”. The 15% withholding tax rate for royalty provided for in Article 12 of the double ... Continue to full case
France vs Société Planet, July 2020, CAA, Case No 18MA04302

France vs Société Planet, July 2020, CAA, Case No 18MA04302

The Administrative Court of Appeal (CAA) set aside a judgement of the administrative court and upheld the tax authorities claims of withholding taxes on royalties paid by Société Planet to companies in Belgium and Malta irrespective of the beneficial owner of those royalties being a company in New Zealand. Hence, Article 12(2) of the Franco-New Zealand tax treaty was not considered applicable to French source royalties whose beneficial owner resided in New Zealand, where they had been paid to an intermediary company established in a third country. Click here for English translation Click here for other translation France vs Planet July 2020 CAA 18MA04302 ... Continue to full case
Italy vs Stiga s.p.a., formerly Global Garden Products Italy s.p.a., July 2020, Supreme Court, Case No 14756.2020

Italy vs Stiga s.p.a., formerly Global Garden Products Italy s.p.a., July 2020, Supreme Court, Case No 14756.2020

The Italian Tax Authorities held that the withholding tax exemption under the European Interest and Royalty Directive did not apply to interest paid by Stiga s.p.a. to it’s parent company in Luxembourg. The interest was paid on a loan established in connection with a merger leverage buy out transaction. According to the Tax Authorities the parent company in Luxembourg was a mere conduit and could not be considered as the beneficial owner of the Italian income since the interest payments was passed on to another group entity. The Court rejected the arguments of the Italian Tax Authorities and recognized the parent company in Luxembourg as the beneficial owner of the interest income. In the decision, reference was made to the Danish Beneficial Owner Cases from the EU Court of Justice to clarify the conditions for application of the withholding tax exemption under the EU Interest and ... Continue to full case
France vs Piaggio, July 2020, Administrative Court of Appeal, Case No. 19VE03376-19VE03377

France vs Piaggio, July 2020, Administrative Court of Appeal, Case No. 19VE03376-19VE03377

Following a restructuring of the Italien Piaggio group, SAS Piaggio France by a contract dated January 2 2007, was changed from an exclusive distributor of vehicles of the “Piaggio” brand in France to a commercial agent for its Italian parent company. The tax authorities held that this change resulted in a transfer without payment for the customers and applied the provisions of article 57 of the general tax code (the arm’s length principle). A tax assessment was issued whereby the taxable income of SAS Piaggio France was added a profit of 7.969.529 euros on the grounds that the change in the contractual relations between the parties had resultet in a transfer of customers for which an independent party would have been paid. In a judgement of October 2019, Conseil dÉtat, helt in favor of the tax authorities and added an additional profit of 7.969.529 to ... Continue to full case
France vs Atlantique Négoce (Enka), June 2020, Conseil d'Etat, Case No. 423809

France vs Atlantique Négoce (Enka), June 2020, Conseil d’Etat, Case No. 423809

For FY 2007 Atlantique Négoce declared having paid dividends to its Luxembourg parent company, Enka, but the tax authorities found that it had not been proven that the Luxembourg parent company was the actual beneficial owner of the dividends. On that basis a claim for withholding tax on the dividends was issued. Judgement of the Conseil d’Etat. The court upheld the decision of the tax authorities and dismissed the appeal of Atlantique Négoce. It follows from the grounds of the judgment of the Court of Justice of the European Union (CJEU) of 26 February 2019, Skatteministeriet v T Danmark and Y Denmark Aps (aff. C-116/16 and C 117/16, paragraph 113) that the status of beneficial owner of the dividends must be regarded as a condition for benefiting from the exemption from withholding tax provided for in Article 5 of Directive 90/435/EEC of 23 July 1990 ... Continue to full case