Legal issue: Disallowed deduction

Luxembourg vs “TR Swap SARL”, November 2022, Administrative Tribunal, Case No 43535

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The owner of a buy sell distributor in the pharmaceutical sector had entered into a total return swap with the company and on that basis the company had deducted a commission corresponding to 85% of net profits from its taxable income. The tax authorities disallowed the deduction claiming the swap-arrangement was not at arm’s length. […]

India vs Akzo Nobel India Pvt Ltd, September 2022, High Court of Delhi, ITA 370/2022

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The tax authorities had disallowed deductions for purported administrative services paid for by Akzo Nobel India to a group company in Singapore. The Income Tax Appellate Tribunal upheld the assessment in a Judgement issued in February 2022. An appeal was then filed by Akzo Nobel India with the High Court. Judgement of the High Court […]

Poland vs “H. LVAS Sp. z oo”, September 2022, Administrative Court, Case No I SA / Go 234/22

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“H. LVAS Sp. z oo” had deducted expenses related to intra-group services in its taxable income. The services had been provided by its German parent company, H. GmbH. The services (supervision and management support, coordination of projects, support in accounting, controlling, IT and personnel) had been classified by the group as low value-added services. Following […]

India vs Sulzer Tech India Pvt Ltd, July 2022, Income Tax Appellate Tribunal, Case No ITAT No 633-MUM-2021

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Sulzer Tech India Pvt Ltd (the assessee) is in the business of providing design and engineering services. To that end Sulzer Management AG, an associated enterprise provided various IT and support services to Sulzer Tech India. The payment for these services had been determined based on a benchmark study where Sulzer Management AG was chosen […]

Norway vs Fortis Petroleum Norway AS, March 2022, Court of Appeal, Case No LB-2021-26379

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In 2009-2011 Fortis Petroleum Norway AS (FPN) bought seismic data related to oil exploration in the North Sea from a related party, Petroleum GeoServices AS (PGS), for NKR 95.000.000. FBN paid the amount by way of a convertible intra-group loan from PGS in the same amount. FPN also purchased administrative services from another related party, […]

UK vs NCL Investments Ltd, March 2022, UK Supreme Court, Case No [2022] UKSC 9

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The companies NCL Investments Ltd and Smith & Williamson Corporate Services Ltd (the Companies) had granted its employees stock options to acquire shares in the ultimate holding company, Smith & Williamson Holdings Limited (SWHL). The companies employ staff and make those staff available to other companies in the group in return for a fee. That […]

Australia vs Singapore Telecom Australia Investments Pty Ltd, December 2021, Federal Court of Australia, Case No FCA 1597

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Singapore Telecom Australia Investments Pty Ltd entered into a loan note issuance agreement (the LNIA) with a company (the subscriber) that was resident in Singapore. Singapore Telecom Australia and the subscriber were ultimately 100% owned by the same company. The loan notes issued totalled approximately $5.2 billion to the subscriber. The terms of the LNIA […]

Italy vs NEOPOST ITALIA s.r.l. (QUADIENT ITALY s.r.l.), September 2021, Supreme Court, Case No 25025/2021

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Neopost Italia s.r.l. had paid service fees and royalties to its French parent. Following an audit, deductions for these intra-group transactions was adjusted by the tax authorities due to non compliance with the arm’s length principle and lack of documentation. However, for the purpose of determining an arm’s length remuneration a benchmark study had been […]

Colombia vs Interoil Colombia Exploration and Production S.A., September 2021, The Administrative Court, Case No. 24282

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Interoil Colombia Exploration and Production S.A. paid it foreign parent for cost related to exploration and administrative services, and for tax purposes these costs had been deducted in the taxable income. In total $3,571,353,600 had been declared as operating expenses for geological and geophysical studies carried out in the exploratory phase of an oil project […]

Czech Republic vs D. D. D. SERVIS OPAVA v. o. s., August 2021, Supreme Administrative Court, Case No 1 Afs 109/2021 – 67

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Following an audit the tax authorities issued an assessment of additional income resulting from an adjustment of the tax deductions related to marketing expenses. According to the tax authorities the parties to the transactions were “otherwise related” within the meaning of the Czech arm’s length provisions in § 23 par. b) point 5 of the […]

Czech Republic vs. LCN GROUP s.r.o., July 2021, Supreme Administrative Court, Case No 2 Afs 148/2020 – 37

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LCN Group had deducted costs in its taxable income for marketing services provided by related parties – PRESSTEX MEDIA SE and TARDEM Media s.r.o. and PAPILIO. The claimed advertising costs from PRESSTEX in FY 2012 was produced and implemented by PAPILIO and subsequently invoiced to LCN Group, virtually unchanged, at a price 23 times higher […]

Indonesia vs PT Mondelez Indonesia, July 2021, Supreme Court, Case No. 2031/B/PK/PJK/2021

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Following an audit of PT Mondelez Indonesia, the tax authorities issued an assessment where certain controlled transactions had been adjusted resulting in additional taxable income. A complaint was filed with the Tax Court where, in a decision issued 26 October 2021 the Court partially set aside the assessment. An appeal was then filed with the […]

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

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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 […]

St. Vincent & the Grenadines vs Unicomer (St. Vincent) Ltd., April 2021, Supreme Court, Case No SVGHCV2019/0001

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Unicomer (St. Vincent) Ltd. is engaged in the business of selling household furniture and appliances. In FY 2013 and 2014 Unicomer entered into an “insurance arrangement” involving an unrelated party, United insurance, and a related party, Canterbury. According to the tax authorities United Insurance had been used as an intermediate/conduit to funnel money from the […]

France vs. SMAP, March 2021, Administrative Court of Appeal, Case No. 19VE01161

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The French company SMAP carries out activities in the area of advertising management and organisation of trade fairs. Following an audit of the company for FY 2008 to 2011 and assessment was issued where deduction of costs for certain intra group “services” had been denied, resulting in additional value added tax, corporate income tax surcharges, […]

Spain vs DIGITEX INFORMÁTICA S.L., February 2021, National Court, Case No 2021:629

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DIGITEX INFORMATICA S.L. had entered into a substantial service contract with an unrelated party in Latin America, Telefonica, according to which the DIGITEX group would provide certain services for Telefonica. The contract originally entered by DIGITEX INFORMATICA S.L. was later transferred to DIGITEX’s Latin American subsidiaries. But after the transfer, cost and amortizations related to […]

Czech Republic vs. STARCOM INTERNATIONAL s.r.o., February 2021, Regional Court , Case No 25Af 18/2019 – 118

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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 […]

Czech Republic vs D. D. D. SERVIS OPAVA v. o. s., January 2021, Regional Court in Ostrava, Case No 22 Af 42/2019- 36

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Following an audit the tax authorities issued an assessment of additional income resulting from an adjustment of the tax deductions related to marketing expenses. According to the tax authorities the parties to the transactions were “otherwise related” within the meaning of the Czech arm’s length provisions in § 23 par. b) point 5 of the […]

Italy vs “Plastic Pipes s.p.a.”, January 2021, Supreme Court, Case 230-2021

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Plastic Pipes s.p.a. produces and sells flexible plastic pipes, via foreign subsidiaries, to which it supplies the product to be resold to foreign customers and it operates abroad, selling the product directly to customers, also in foreign countries where it has a subsidiary. The tax authorities had issued a notice of assessment for FY 2006 […]

Taiwan vs Weitian Technology Co. Ltd. December 2020, Supreme Administrative Court, Case No 109 Pan Tzu No. 661

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Weitian Technology Co. Ltd (AKA ProLight Opto Technology Corp), a Taiwanese company active in the global LED industry, claimed that factors affecting market prices had not been fully considered while determining the prices of products sold to its subsidiary in Shanghai, and that this had caused major losses in the subsidiary. To account for these […]

Singapore vs Intevac Asia Pte Ltd, October 2020, High Court, Case No [2020] SGHC 218, Tax Appeal No 3 of 2020

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The Intevac group initially focused on designing and producing thin-film production systems for the manufacturing of hard disk drives (“HDD”). However, sometime in or around the mid-2000s, Intevac Asia Pte Ltd received a purchase order for a tool designed for the manufacturing of solar cells. Intevac Asia Pte Ltd did not possess the relevant R&D […]

Czech Republic vs. LCN Group s.r.o., April 2020, Regional Court, Case No 25 Af 76/2019 – 42

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LCN Group s.r.o. had deducted costs in its taxable income for marketing services provided by related parties. Following an audit, the tax authorities concluded that the prices agreed between the parties was not at arm’s length and issued an assessment. Decision of the Regional Court The Regional Court annulled the assessment and decided in favor […]

Czech Republic vs. J.V., May 2019, Supreme Administrative Court, Case No 2 Afs 131/2018 – 59

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For FY 2007, 2008 and 2009, JV had deducted expenses consisting in the payment for services pursuant to invoices issued by BP Property s.r.o. and TOP ZONEVIEW. The services consisted in the provision and implementation of an advertising campaign. Following an audit the tax authorities adjusted JV’s taxable income by the difference found, since pursuant […]

Spain vs Acer Computer Ibérica S.A., March 2019, AUDIENCIA NACIONAL, Case No 125:2017, NFJ073359

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Acer Computer Ibérica S.A. (ACI) is part of the multinational ACER group, which manufactures and distributes personal computers and other electronic devices. Acer Europe AG (AEAG), a group entity in Switzerland, centralises the procurement of the subsidiaries established in Europe, the Middle East and Africa, and acts as the regional management centre for that geographical […]

Spain vs ICL ESPAÑA, S.A. (Akzo Nobel), March 2018, Audiencia Nacional, Case No 1307/2018 ECLI:ES:AN:2018:1307

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ICL ESPAÑA, S.A., ICL Packaging Coatings, S.A., were members of the Tax Consolidation Group and obtained extraordinary profits in the financial years 2000, 2001 and 2002. (AKZO NOBEL is the successor of ICL ESPAÑA, as well as of the subsidiary ICL PACKAGING.) On 26 June 2002, ICL ESPAÑA, S.A. acquired from ICL Omicron BV (which […]

Czech Republic vs. JUTTY GROUP s.r.o., December 2016, Supreme Administrative Court , Case No 6 Afs 147/2016 – 28

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On the basis of the detailed evidence provided by the tax administration, the defendant stated that the essence of the case is to assess whether the applicant has proved that the taxable supply declared in invoice No 2010036 took place, i.e. that Dosnetex plus s.r.o. provided the invoiced supply (production of graphic designs) to the […]

Czech Republic vs. JN TRANS s.r.o., November 2014, Supreme Administrative Court, Case No 9 Afs 92/2013

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In this case the court accepted the tax authorities’ procedure for determining the arm’s length price for advertising services, whereby the tax authorities took into account conditions such as the size of the advertising space, the type of event, the duration of the advertising, etc., when comparing controlled and uncontrolled transactions The appeal of JN […]

India vs SC Enviro Agro India Pvt. Ltd, 2012, November 2012, Income Tax Appellate Tribunal, ITA Nos.2057 & 2058

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SC Enviro Agro India is a manufacturer of household insecticides and pesticides and had entered into a technology license agreement with a related party – SCCL Japan – and it also purchases the requirement of intermediates from the said company only.  In the years in question, it has purchased intermediates and sold the products to the […]

US vs National Westminster Bank PLC, January 2008, US Court of Appeals, Case No. No. 2007-5028

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NatWest is a United Kingdom corporation engaged in international banking activities. For the tax years 1981-1987, NatWest conducted wholesale banking operations in the United States through six permanently established branch locations (collectively “the U.S. Branch”). On its United States federal income tax returns for the years at issue, NatWest claimed deductions for accrued interest expenses […]

Netherlands vs Bosal Holding BV, September 2003, European Court, Case no C-168/01

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Bosal is a company which carries on holding, financing and licensing/royalty related activities and which, as a taxpayer, is subject to corporation tax in the Netherlands. For the 1993 financial year, it declared costs amounting to NLG 3 969 339 in relation to the financing of its holdings in companies established in nine other Member […]

France vs SA Borsumij Y France, Feb 1997, Adm Court of appeal, No 94PA00511

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The administration found that the reimbursement of a charge represented a transfer of profits abroad where the French company has not substantiated the benefit of the services which the French company could perform itself. Incomplete documents submitted by the company was not considered proof of the purported benefits. This analysis was confirmed by the French […]