Legal issue: Arm's length principle

India vs Times Infotainment Media Ltd, August 2021, Income Tax Appellate Tribunal – Mumbai, TIA No 298/Mum/2014

Times Infotainment Media Ltd (TIML India), is in the entertainment business, including running an FM Broadcasting channel in India. It successfully participated in the auction of the radio business of Virgin radio in March 2008 in the United Kingdom. To complete the acquisition, it acquired two SPV companies, namely TML Golden Square Limited and TIML Global Limited. TIML India wholly held TIML Global which in turn wholly held TIML Golden. TIML India received funding from […]

Italy vs TMC Italia SpA, July 2021, Supreme Court, Case No 18436/2021


TMC Italy SpA is a parent company which provides services and support to the commercial production activities of its affiliated companies based in foreign countries (Spain, Czech Republic, Germany, France, Israel, Brazil, United Kingdom). The costs of providing these intra-group services had been allocated between the related parties based on the number and salary of employees in FY 2008 and 2009. The tax administration issued an assessment where the allocation was instead be based on […]

France Genefinance (Interga), July 2021, Conseil d’Etat, Case No. 434268


Genefinance – previously Interga – carried out a credit risk guarantee activity for the benefit of certain foreign branches and subsidiaries of the SociĂ©tĂ© GĂ©nĂ©rale group to which it belonged. Following an audit, the tax authorities considered the amount of premiums paid by foreign entities in 2008 and 2009 to be insufficient in relation to the guarantees granted and considered that the advantage thus granted characterised a transfer of profits within the meaning of Article […]

Panama vs “Pharma Distributor S.A.”, July 2021, Administrative Tax Court, Case No TAT-RF-066


An adjustment for FY 2013 and 2014 had been issued to a pharmaceutical company in Panama “Pharma Distributor S.A” that resulted in an income adjustment of 19.5 million dollars, which in turn resulted in additional taxes of 2.4 million dollars. The resale price method had been used by Pharma Distributor S.A. to determine the market value of an asset acquired from a related entity that was sold to an independent entity. This method was rejected […]

France vs SA Compagnie Gervais Danone, June 2021, CAA, Case No. 19VE03151


SA Compagnie Gervais Danone was the subject of an tax audit at the end of which the tax authorities questioned, among other things, the deduction of a compensation payment of 88 million Turkish lira (39,148,346 euros) granted to the Turkish company Danone Tikvesli, in which the french company holds a minority stake. The tax authorities considered that the payment constituted an indirect transfer of profits abroad within the meaning of Article 57 of the General […]

Germany vs Lender GmbH, June 2021, Bundesfinanzhof, Case No I R 62/17


Does group affiliation play a role in determining an arm’s length interest rate? A issue is the question of the extent to which group affiliation and subordination play a role in the determination of an arm’s length interest rate. G GmbH (plaintiff) based in Germany took out various loans to finance an acquisition. These included a bank loan (term: 5 years; interest rate: 4.78%; secured; senior), a vendor loan (term: 6 years; interest rate: 10%; […]

Germany vs Lender GmbH, June 2021, Bundesfinanzhof, Case No IR 4/17


Applicable method for determining the arm’s length price in the case of a loan granted by a sister corporation domiciled abroad: (1) Are the three recognised methods for determining arm’s length prices (price comparison method, resale method and cost plus method) equally applicable? (2) Should the price comparison method be used if a comparable price can be determined on the basis of identical service relationships and conditions, and the cost-plus method if there are no […]

Finland vs A Oy, June 2021, Supreme Administrative Court, Case No. KHO:2021:73


A Oy was part of the A group, whose parent company was A Corporation, a US corporation. A Oy had acted as the group’s limited risk distribution company in Finland. The transfer prices of the group companies had been determined on a mark-to-market basis using the net transaction margin method and the group companies’ operating profit on a mark-to-market basis had been determined on the basis of US GAAP, the accounting standard commonly applied within […]

France vs. SARL SRN MĂ©tal, May 2021, CAA, Case No. 19NC03729


SARL SRN MĂ©tal’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 MĂ©tal to B-Lux Steel, established in Luxembourg, were invoiced at a lower price than that charged to the company’s other customers and (2) […]

Australia vs Glencore, May 2021, High Court, Case No [2021] HCATrans 098


Glencore Australia (CMPL) sold copper concentrate produced in Australia to its Swiss parent, Glencore International AG (GIAG). The tax authorities found, that the price paid by Glencore International AG to Glencore Australia for the copper concentrate in the relevant years according to a price sharing agreement was less than the price that might reasonably be expected to have been paid in an arm’s length dealing between independent parties. The tax assessment was brought to court […]

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