Norway vs A/S Norske Shell, September 2019, Borgarting lagmannsrett, Case No LB-2018-79168 – UTV-2019-807

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A/S Norske Shell – an entity within the Dutch Shell group – had operations on the Norwegian continental shelf and conducted research and development (R&D) through a subsidiary. All R&D costs were deducted in Norway.

The Norwegian tax authority applied the arms length principle and issued a tax assessment. It was assumed that the R&D expense was due to a joint interest with the other upstream companies in the Shell group.

The Court of Appeal found that the R&D conducted in Norway also constituted an advantage for the foreign companies within the group for which an independent company would demand compensation. The resulting reduction in revenue provided the basis for determining the company’s income on a discretionary basis in accordance with section 13-1 of the Tax Act. The tax authorities determination of the amount of the income reduction had not based on an incorrect or incomplete fact, nor did the result appear arbitrary or unreasonable. The Court of Appeal concluded that the decision was valid and rejected the company’s appeal.

The judgement has later been appealed to the Supreme Court, HR-2020-122-U.

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No vs Shell Borgarting lagmannsrett 2019

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