Legal issue: Local tax regulations

Costa Rica vs British Tobacco Centroamérica S.A. March 2022, Supreme Court, Case No 750-2022

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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 […]

Austria vs “ACQ-Group”, February 2022, Bundesfinanzgericht, Case No RV/7104702/2018

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“ACQ-Group” had acquired the shares in foreign subsidiaries and financed the acquisition partially by intra group loans. Furthermore, in the years following the acquisition, goodwill amortisations were deducted for tax purposes. The tax authorities issued an assessment where the interest rate on the loans had been reduced, and where costs related to external financing and amortisations of acquired goodwill had been denied. An appeal was filed by “ACQ”. Decision of the Federal Tax Court Before […]

Hungary vs G.K. Ktf, December 2021, Court of Appeals, Case No. Kfv.V.35.306/2021/9

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G.K. Ktf was a subsidiary of a company registered in the United Kingdom. On 29 December 2010 G.K. Ktf entered into a loan agreement with a Dutch affiliate, G.B. BV, under which G.B. BV, as lender, granted a subordinated unsecured loan of HUF 3 billion to G.K. Ktf. Interest was set at a fixed annual rate of 11.32%, but interest was only payable when G.K. Ktf earned a ‘net income’ from its activities. The maturity […]

Canada vs Alta Energy Luxembourg S.A.R.L., November 2021, Supreme Court, Case No 2021 SCC 49 – 2021-11-26

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ALTA Energy, a resident of Luxembourg, claimed an exemption from Canadian income tax under Article 13(5) of the Canada-Luxembourg Income Tax Treaty in respect of a large capital gain arising from the sale of shares of ALTA Canada, its wholly-owned Canadian subsidiary. At that time, Alta Canada carried on an unconventional shale oil business in the Duvernay shale oil formation situated in Northern Alberta. Alta Canada was granted the right to explore, drill and extract […]

Colombia vs Petroleum Exploration International Sucursal Colombia S.A., November 2021, The Administrative Court, Case No. 25000-23-37-000-2016-01988-01(24028)

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Article 260-8 of the Colombian Tax Statute established which taxpayers were obliged to file Transfer pricing documentation. The rule established two requirements for income taxpayers to be obliged to file DIIPT in the year 2010, the first is to have obtained a gross equity on 31 December of the taxable period of 100.100,000 UVT ($2,455,500,000) or gross income of 61,000 UVT ($1,497,855,000), and the second is to have carried out operations with economic associates or […]

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 – KES 504,643,172.00 and; Reverse Value Added Tax(VAT) on imported services– KES 714,258,472.00 all totaling KES 1,333,895,311.00. An appeal was […]

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 and $5.548.680.347 had been declared for administrative services rendered from its parent company abroad Following an audit the tax authorities […]

Poland vs R.B.P. (P.) Sp. z o.o.., August 2021, Supreme Administrative Court, Case No II FSK 3830/18

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The company is a producer of household chemicals and belongs to the R. B. (“the Group”), which is active in the manufacture and sale of consumer products in the home, health and hygiene products industry. The Company has entered into supply agreements for the goods it produces with Group companies. On the basis of the agreements, the Applicant sells goods produced by it to entities of the Group indicated by R. A. h. Companies and […]

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 Income Tax Act. SERVIS OPAVA filed an appeal against the assessment claiming that the tax authorities did not established the […]

Poland vs Q. F. sp. z o.o., January 2021, Supreme Administrative Court, Case No II FSK 2514

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A request for an interpretation was submitted by a company in regards to financial transactions (loans and guarantees) with related parties. The requested interpretation was relevant in determining the amount of the controlled transactions and on that basis whether the taxpayer was required to prepare TP documentation or not. The company held that in determining the value of a loan transaction, only the value of interest should be taken into account. The tax authorities held […]

Switzerland vs A GmbH und B GmbH, August 2020, Federal Supreme Court, Case No 2C_1116/2018

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Two Swiss companies, A GmbH und B GmbH, belonged to a multinational group under a Dutch parent. The group provided food and fuel to military troops and civilian in areas of crises and armed conflicts. A group company located in the United Arab Emirates provided services to the Swiss companies primarily in relation to activities in Afghanistan. A GmbH und B GmbH had a permanent establishment in Afghanistan. As there are no tax treaties between […]

Spain vs Stavelot Comunicación S.L., May 2020, Tribunal Supremo, Case No 446/2020, STS 951/2020 – ECLI:EN:TS:2020:951

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In the case at hand a related-party transactions had been carried out between a person (shareholder) and a related company. The transaction took place in 2007 and 2008 and was exempt from Spanish transfer pricing documentation requirements. The tax authorities issued an assessment where the transfer pricing had been adjusted and a penalty/fine was added to the claim. The taxpayer was of the opinion that the exemption from penalties extended to cases where the controlled […]

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 its business the wholesale trade in medical and surgical equipment, tools and similar items, keeping, for the purpose of monitoring […]

Tanzania vs Aggreko International Projects Ltd, June 2019, Court of Appeal, Case No 148 of 2018

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Aggreko International Projects (AIP branch) operates in Tanzania as a branch of Aggreko International Projects Limited, a UK company engaged in generation of emergency/temporary power, and working mainly with Tanzania National Electricity Supply Company Limited (TANESCO) as the main customer. In FY 2011 to 2012, the head office provided a number of services for which the AIP branch paid management fees. In the financial year 2013-2014, the tax authorities conducted an audit. The tax authorities […]

Spain vs Representaciones Creta S.L., October 2018, Tribunal Supremo, Case No 1504/2018, STS 3632/2018 – ECLI:ES:TS:2018:3632

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Tax penalties/fines had been issued following a transfer pricing adjustments in regards of controlled transactions exempt from Spanish TP documentation requirements. An appeal was filed by the taxpayer claiming to be excluded from the Spanish penalty regime. The appeal was dismissed by the lower courts. Judgement of the Supreme Court The Supreme Court upheld the decision of the lower courts and dismissed the appeal of the taxpayer. The Court ruled that the specific transfer pricing […]

Philippines vs Yi Wine Club, Inc., December 2017, Tax Court, CTA CASE No. 8809

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In this case, the tax authorities had issued an assessment to Yi Wine Club, Inc. where interest on an interest free loan extended to its affiliates had been imputed and added to the taxable income, pursuant to Section 50 of the National Internal Revenue Code. Judgement of the Tax Court The Court decided in favour of Yi Wine Club and set aside the tax assessment. The court referred to the previous Supreme Court case of […]

Brazil vs Syngenta Protecao de Cultivos LTDA, September 2016, CARF Case No 16561.000199/2008­16

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Syngenta had been issued a tax assessment related to two tax violations: (1) incorrect ascertainment of the PRL 60, in disagreement with IN SRF no. 243, of 2002, in the ascertainment of transfer prices, and (2) omission of revenues arising from inventory differences. Syngenta filed an opposition claiming (1) illegality of IN SRF 243, of 2002; (2) undue inclusion of freight, insurance and taxes in the price charged. (3) inadequacy of the revenue omission and […]

Brazil vs LG Electronics Do Brasil LTDA., May 2016, Superior Chamber of Tax Appeals, Case No 9101-002.323

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LG Electronics Do Brasil LTDA imported goods from a related company and used the “resale price minus” method to determine the arm’s length price. Following an audit, an assessment was issued where the tax authorities rejected the pricing method chosen by LG Electronics. An appeal was filed by LG Electronics with the Court of Appeals and in a judgment issued in 2013 the assessment of the tax authorities was set aside. An appeal was then […]

Italy vs F. S.p.A., February 2016, Regional Tax Commission, Case No 02/02/2016 n. 258/11

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The Provincial Tax Commission had upheld F. S.p.A.’s appeal and set aside the assessment made by the tax authorities, both because it had failed to prove tax avoidance and because it had used the TNMM (Transactional Net Margin Method) method, which the tax authorities advised against in favour of the CUP (Comparable Uncontrolled Price) method, as used by the F. S.p.A. Judgement of the Regional Tax Commission The conclusion reached by the Regional Tax Commission, […]

Brazil vs LG Electronics Do Brasil LTDA., May 2016, Administrative Court of Appeals, Case No 1302-001,162

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LG Electronics Do Brasil LTDA imported goods from a related company and used the “resale price minus” method to determine the arm’s length price. Following an audit, an assessment was issued for FY 2006 and 2007 where the tax authorities rejected the pricing method chosen by LG Electronics. An appeal was filed by LG Electronics with the Administrative Court of Appeal. Judgement of the Court The Court set aside the assessment of the tax authorities […]

Canada vs VELCRO CANADA INC., February 2012, Tax Court, Case No 2012 TCC 57

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The Dutch company, Velcro Holdings BV (“VHBV”), licensed IP from an affiliated company in the Dutch Antilles, Velcro Industries BV (“VIBV”), and sublicensed this IP to a Canadian company, Velcro Canada Inc. (VCI). VHBV was obliged to pay 90% of the royalties received from VCI. within 30 days after receipt to VIBV. At issue was whether VHBV qualified as Beneficial Owner of the royalty payments from VCI and consequently would be entitled to a reduced […]

Poland vs “H-trademark S.A.”, February 2012, Administrative Court, Case No I SA/Po 827/11

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“H-trademark S.A.” applied for a ruling on the tax rules governing a business restructuring where trademarks were transferred to another group company and licensed back – whether Polish arm’s length provisions would apply to the transaction. The company was of the opinion that Polish arm’s length provision (article 11) would not apply, since the arrangement was covered by special Polish provisions related to financial leasing (article 17b-g). Judgement of the Court The Court found that […]

US vs Xilinx Inc, March 2010, Court of Appeal, Nos. 06-74246, 06-74269

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At issue was whether, under the tax regulations in effect during tax years 1997, 1998 and 1999, related companies engaged in a joint venture to develop intangible property must include the value of certain stock option compensation one participant gives to its employees in the pool of costs to be shared under a cost sharing agreement, even when companies operating at arm’s length would not do so. The tax court found related companies are not […]

Philippines vs Belle Corporation, October 2006, Tax Court, CTA CASE No. 6156

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In this case, the tax authorities had issued an assessment to Belle Corporation pursuant to Section 43 (now Section 50) of the National Internal Revenue Code. The tax authorities alleges that Belle’s granting of advances to its affiliates is tantamount to granting loan or credit which is subject to DST under Section 180 of the Tax Code. Furthermore, the CIR argues that the letters of instruction and cash vouchers, which are written documents to advance […]