Legal issue: Local anti avoidance

Denmark vs NetApp Denmark ApS and TDC A/S, January 2023, Supreme Court, Cases 69/2021, 79/2021 and 70/2021

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The issue in the Danish beneficial ownership cases of NetApp Denmark ApS and TDC A/S was whether the companies were obliged to withhold dividend tax on distributions to foreign parent companies. The first case – NetApp Denmark ApS – concerned two dividend distributions of approximately DKK 566 million and DKK 92 million made in 2005 […]

Sweden vs “A Share Loan AB”, December 2022, Supreme Administrative Court, Case No 3660-22

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As a general rule interest expenses are deductible for the purposes of income taxation of a business activity. However, for companies in a group, e.g. companies in the same group, certain restrictions on the deductibility of interest can apply. In Sweden one of these limitations is that if the debt relates to the acquisition of […]

US Supreme Court denies Whirlpool’s request for judicial review of the 2021 judgement from the Court of Appeal.

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21 November 2022 the US Supreme Court denied Whirlpool its request for judicial review of the December 2021 judgement of the Court of Appeal (Sixth Circuit).     10 August 2022 Whirlpool filed a “petition for writ” with the Supreme Court of the United States. “Petitioners Whirlpool Financial Corporation & Consolidated Subsidiaries and Whirlpool International […]

New Zealand vs Frucor Suntory, September 2022, Supreme Court, Case No [2022] NZSC 113

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Frucor Suntory (FHNZ) had deducted purported interest expenses that had arisen in the context of a tax scheme involving, among other steps, its issue of a Convertible Note to Deutsche Bank, New Zealand Branch (DBNZ), and a forward purchase of the shares DBNZ could call for under the Note by FHNZ’s Singapore based parent Danone […]

Sweden vs Swedish Match Intellectual Property AB, May 2022, Supreme Administrative Court, Case No MĂ„l: 5264–5267-20, 5269-20

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At issue was whether the acquisition value of an inventory acquired from a related company should be adjusted on the basis of Swedish arm’s length provisions or alternatively tax avoidance provisions According to the arm’s length rule in Chapter 18, Section 11 of the Income Tax Act, the acquisition value is to be adjusted to […]

Japan vs Universal Music Corp, April 2022, Supreme Court, Case No ä»€ć’Œ2(èĄŒăƒ’)303

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An intercompany loan in the form of a so-called international debt pushdown had been issued to Universal Music Japan to acquire the shares of another Japanese group company. The tax authority found that the loan transaction had been entered for the principal purpose of reducing the tax burden in Japan and issued an assessment where […]

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, […]

Italy vs Mauser S.p.A., February 2022, Supreme Court, Case No 6283/2022

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Following an audit, Mauser S.p.A. received four notices of assessment relating to the tax periods from 2004 to 2007. These notices contested, in relation to all tax periods, the elusive purpose of a financing operation of Mauser S.p.A. by the non-resident parent company, as it was aimed at circumventing the non-deductibility of interest expense pursuant […]

Italy vs Arnoldo Mondadori Editore SpA , February 2022, Supreme Court, Cases No 3380/2022

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Since Arnoldo Mondadori Editore SpA’s articles of association prevented it from issuing bonds, financing of the company had instead been archived via an arrangement with its subsidiary in Luxembourg, Mondadori International S.A. To that end, the subsidiary issued a bond in the amount of EUR 350 million, which was subscribed for by US investors. The […]

Netherlands – Crop Tax Advisers, January 2022, Court of Appeal, Case No. 200.192.332/01, ECLI:NL:GHARL:2022:343

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The question at issue was whether a Crop tax adviser had acted in accordance with the requirements of a reasonably competent and reasonably acting adviser when advising on the so-called royalty routing and its implementation. Judgement of the Court of Appeal “Crop is liable for the damages arising from the shortcoming. For the assessment of […]

Portugal vs “GAAR S.A.”, January 2022, Supremo Tribunal Administrativo, Case No : JSTA000P28772

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“GAAR S.A” is a holding company with a share capital of EUR 55,000.00. In 2010, “GAAR S.A” was in a situation of excess equity capital resulting from an accumulation of reserves (EUR 402,539.16 of legal reserves and EUR 16,527,875.72 of other reserves). The Board of Directors, made up of three shareholders – B………… (holder of […]

France vs UBS AG and UBS SA, December 2021, CAA of Paris, Dossier No. 19/05566 Arrét No. 192/21

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Swiss banking group, UBS, had set up a system aimed at facilitating tax evasion and money laundering of wealthy French taxpayers. Judgement of the Court of Appeal By judgment of the Paris Court of Appeal dated 13 December 2021, the Swiss parent, UBS AG, was found guilty of banking and financial canvassing and of facilitating […]

US vs Whirlpool, December 2021, U.S. Court of Appeals, Case No. Nos. 20-1899/1900

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The US tax authorities had increased Whirlpool US’s taxable because income allocated to Whirlpool Luxembourg for selling appliances was considered taxable foreign base company sales income FBCSI/CFC income to the parent company in the U.S. under “the manufacturing branch rule” under US tax code Section 951(a). The income from sales of appliances had been allocated […]

Canada vs Loblaw Financial Holdings Inc., December 2021, Supreme Court, Case No 2021 SCC 51

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In 1992, Loblaw Financial Holdings Inc. (“Loblaw Financial”), a Canadian corporation, incorporated a subsidiary in Barbados. The Central Bank of Barbados issued a licence for the subsidiary to operate as an offshore bank named Glenhuron Bank Ltd. (“Glenhuron”). Between 1992 and 2000, important capital investments in Glenhuron were made by Loblaw Financial and affiliated companies […]

Denmark vs Takeda A/S and NTC Parent S.a.r.l., November 2021, High Court, Cases B-2942-12 and B-171-13

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The issue in these two cases is whether withholding tax was payable on interest paid to foreign group companies considered “beneficial owners” via conduit companies covered by the EU Interest/Royalties Directive and DTA’s exempting the payments from withholding taxes. The first case concerned interest accruals totalling approximately DKK 1,476 million made by a Danish company […]

Kenya vs Dominion Petroleum Dkenya Ltd, November 2021, High Court of Kenya, TAX APPEAL NO. E093 OF 2020

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Dominion Petroleum Dkenya’s principal activity was exploration of oil and gas. The tax authorities carried out an in-depth audit of Dominion’s operations and tax affairs for the years of income 2011 to 2016, which resulted in the following taxes being raised: Withholding Income Tax (WHT) on imported services – KES 114,993,666.00; WHT on deemed interest […]

Brazil vs DSM Produtos Nutricionais Brasil S.A., October 2021, Federal Regional Court, Case No. 5013244-89.2018.4.03.6100

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DSM Produtos Nutricionais Brasil S.A. had based the intragroup pricing of imported goods on the “RPL-60 method” which applied in Brazil up until 2012. “Article 18, II of Law 9430/1996, as amended by Law 9. 959/2000, provides that the transfer price, in the case of goods and rights imported for application in the productive process, […]

Spain vs SGL Carbon Holding, September 2021, Tribunal Supremo, Case No 1151/2021 ECLI:EN:TS:2021:3572

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A Spanish subsidiary – SGL Carbon Holding SL – had significant financial expenses derived from an intra-group loan granted by the parent company for the acquisition of shares in companies of the same group. The taxpayer argued that the intra-group acquisition and debt helped to redistribute the funds of the Group and that Spanish subsidiary […]

Israel vs Sephira & Offek Ltd and Israel Daniel Amram, August 2021, Jerusalem District Court, Case No 2995-03-17

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While living in France, Israel Daniel Amram (IDA) devised an idea for the development of a unique and efficient computerized interface that would link insurance companies and physicians and facilitate financial accounting between medical service providers and patients. IDA registered the trademark “SEPHIRA” and formed a company in France under the name SAS SEPHIRA . […]

Netherlands vs Hunkemöller B.V., July 2021, Supreme Court, Case No ECLI:NL:2021:1152

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In 2011 a Dutch group “Hunkemöller BV” acquired “Target BV” for EUR 135 million. The acquisition was financed by four French affiliates “FCPRs” in the Dutch Group – EUR 60,345,000 in the form of convertible instruments (intercompany debt) and the remainder in the form of equity. The convertible instruments carried an interest rates of 13 […]

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

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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 […]

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 […]

Portugal vs “M Fastfood S.A”, April 2021, Tribunal Central Administrativo Sul, Case No 1331/09

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“M Fastfood S.A” was incorporated as a subsidiary company of an entity not resident in Portuguese territory, M Inc., a company with registered office in the United States. “M Fastfood S.A” had obtained financing from M Inc. for investment in its commercial activity, which resulted in indebtedness totalling EUR 74,000,000.00. The activity of “M Fastfood […]

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

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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 […]

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

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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 […]

Colombia vs Taxpayer, November 2020, The Constitutional Court, Sentencia No. C-486/20

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A Colombian taxpayer had filed an unconstitutionality complaint against Article 70 (partial) of Law 1819 of 2016, “Whereby a structural tax reform is adopted, mechanisms for the fight against tax evasion and avoidance are strengthened, and other provisions are enacted.” The Constitutional Court ruled that the Colombian GAAR legislation was not unconstitutional.   Click here […]

Italy vs Spazio Immobiliare 2000 s.r.l., September 2020, Supreme Court, Cases No 20823/2020

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The facts underlying the notice of assessment are undisputed: a) Casa di Cura Santa Rita s.p.a. grants a free loan to Spazio Immobiliare 2000 s.r.l.; b) the latter company, substantially lacking its own means and wholly controlled by the former, uses the parent company’s loan in full to purchase certain assets; c) said assets are […]

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

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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 […]

Peru vs. “P Services”, July 2020, Tax Court, Case No 03052-5-2020

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“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 […]

Greece vs S.p.A. ST. MEDICAL, May 2020, Supreme Administrative Court, Case No A 984/2020

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Following an audit the tax authorities issued a tax assessment and a substantial fine to S.p.A. ST. MEDICAL related to costs deducted in FY 2009, which the tax authorities claimed were partially fictitious. “the Economic Police carried out, on 22.10.2012, a tax audit of the appellant, which, during the contested management period (1.1.-31.12.2009), had as […]

Greece vs S.p.A. ST. MEDICAL, May 2020, Supreme Administrative Court, Case No A 985/2020

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Following an audit the tax authorities issued a tax assessment and a substantial fine to S.p.A. ST. MEDICAL related to costs deducted in FY 2010, which the tax authorities claimed were partially fictitious. “the Economic Police carried out, on 22.10.2012, a tax audit of the appellant, which, during the contested management period (1.1.-31.12.2010), had as […]

Greece vs BMW HELLAS S.A., April 2020, Supreme Administrative Court, Case No A 685/2020

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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 […]

Canada vs Loblaw Financial Holdings Inc., April 2020, Federal Court of Appeal, Case No 2020 FCA 79

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In the case of Canadian grocery chain Loblaw, the Canadian Tax Court in 2018 found that using an offshore banking affiliate in a low tax jurisdiction – Barbados – to manage the groups investments did not constitute tax avoidance. However, the Tax Court’s interpretation of a technical provision in the Canadian legislation had the consequence […]

Switzerland vs Coffee Machine Group, April 2020, Federal Supreme Court, Case No 2C_354/2018

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Coffee Machine Ltd. was founded in Ireland and responsible for the trademark and patent administration as well as the management of the research and development activities of the A group, the world’s largest manufacturer of coffee machines. A Swiss subsidiary of the A group reported payments of dividend to the the Irish company and the […]

Netherlands vs Hunkemöller B.V., January 2020, AG opinion – before the Supreme Court, Case No ECLI:NL:PHR:2020:102

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To acquire companies and resell them with capital gains a French Investment Fund distributed the capital of its investors (€ 5.4 billion in equity) between a French Fund Commun de Placement Ă  Risques (FCPRs) and British Ltds managed by the French Investment Fund. For the purpose of acquiring the [X] group (the target), the French […]

Germany vs Cyprus Ltd, June 2018, BFH judgment Case No IR 94/15

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The Bundesfinanzhof confirmed prior case law according to which the provisions on hidden deposits and hidden profit distributions must be observed in the context of the additional taxation. On the question of economic activity of the controlled foreign company, the Bundesfinanzhof refers to the ruling of the European Court of Justice concerning Cadbury-Schweppes from 2006. […]

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 […]

Japan vs “TH Corp”, January 2017, District Court, Case No. 56 of 2014 (Gyoseu)

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A tax assessment based on Japanese CFC rules (anti-tax haven rules) had been applied to a “TH Corp”‘s, subsidiary in Singapore. According to Japanese CFC rules, income arising from a foreign subsidiary located in a state or territory with significantly lower tax rates is deemed to arise as the income of the parent company when the principal business of the […]

Norway vs. ConocoPhillips, October 2016, Supreme Court HR-2016-988-A, Case No. 2015/1044)

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A tax assessments based on anti-avoidance doctrine “gjennomskjĂŠring” were set aside. The case dealt with the benefits of a multi-currency cash pool arrangement. The court held that the decisive question was whether the allocation of the benefits was done at arm’s length. The court dismissed the argument that the benefits should accure to the parent company as only common control between […]

Tanzania vs. AFRICAN BARRICK GOLD PLC, March 2016, Tax Revenue Appeals Tribunal, Case No. 16 OF 2015

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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 from the Bulyanhulu and Buzwagi mines. Acacia Mining was accused of operating illegally in the country and for tax evasion. Decision of the Tax […]

Germany vs. “Loss and Limitation Gmbh”, November 2015, Supreme Tax Court judgment I R 57/13

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There are a number of exceptions to the German interest limitation rule essentially limiting the annual interest deduction to 30% of EBITDA as shown in the accounts. One of these is the equity ratio rule exempting a subsidiary company from the interest limitation provided its equity ratio (ratio of shareholder’s equity to the balance sheet […]

Germany – Constitutionality of interest limitation provisions, October 2015, Supreme Tax Court decision I R 20/15

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The Supreme Tax Court has requested the Constitutional Court to rule on the conformity of the interest limitation with the constitutional requirement to tax like circumstances alike. The interest limitation disallows net interest expense in excess of 30% of EBITDA. However, the rule does not apply to companies with a total net annual interest cost […]

Philippines vs Filinvest Development Corporation, July 2011, Supreme Court, G.R. No. 163653

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In the Filinvest case an assessment had been issued where the tax authorities had imputed interest on an interest free loan. Judgement of the Tax Court The Court set aside the assessment. The tax authorities power to allocate gross income does not include the power to impute ‘theoretical interest’ because there must be actual or, […]

US vs. Sherwin-Williams Company, March 2011, Massachusetts Appeals Court Decisions, Case No 79 Mass. App. Ct. 159

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In the case of Talbots Inc, the Massachusetts Appeals Court Decisions found that the Appellate Tax Board correctly affirmed the denial by the Commissioner of Revenue (commissioner) of a taxpayer’s request to abate corporate excise taxes that were assessed against the taxpayer on the basis of disallowed deductions for royalty payments the taxpayer made to a […]

New Zealand vs Ben Nevis Forestry Ventures Ltd., December 2008, Supreme Court, Case No [2008] NZSC 115, SC 43/2007 and 44/2007

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The tax scheme in the Ben Nevis-case involved land owned by the subsidiary of a charitable foundation being licensed to a group of single purpose investor loss attributing qualifying companies (LAQC’s). The licensees were responsible for planting, maintaining and harvesting the forest through a forestry management company. The investors paid $1,350 per hectare for the […]

UK vs. W. T. Ramsay Limited, March 1981, HOUSE OF LORDS, Case No. HL/PO/JU/18/241

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In the case of Ramsay a substance over form-doctrine was endorsed by the House of Lords (predecessor of the “UK Supreme Court” established in 2009). The “Ramsay principle” has since been applied in other cases involving tax avoidance schemes in the UK, where transactions have been constructed purely for tax purposes. Statutes referring to “commercial” […]