An assessment was issued by the Norwegian tax authorities for years 2009 2010 and 2011 concerning the interest on a loan between Exxonmobil Production Norway Inc. (EPNI) as the lender and Exxon Mobile Delaware Holdings Inc. (EMDHI) as the borrower.
Both EPNI and EMDHI are subsidiaries in the Exxon Group, where the parent company is domiciled in the United States.
The loan agreement between EPNI and EMDHI was entered into in 2009. The loan had a drawing facility of NOK 20 billion. The agreed maturity was 2019, and the interest rate was fixed at 3 months NIBOR plus a margin of 30 basis points. The agreement also contained provisions on quarterly interest rate regulation and a interest adjustment clause allowing the lender to adjust the interest rate on changes in the borrower’s creditworthiness.
The dispute concerns the margin of 30 basis points and the importance of the adjustment clause, also referred to as the step-up clause.
The Oil Tax office and the Appeals Board for Oil Tax found that the agreed interest rate was not at arm’s length and taxable income for the three relevant years was increased by a total of NOK 95 525 000.
EPNI filed an appeal to Oslo District Court.
In 2016 the District Court ruled in favor of the tax authorities.
EPNI then filed an appeal to the National Court of Appeal.
The National Court of Appeal concluded that the interest payments had not been at arm’s length and dismissed the appeal.
In the decision, reference is made to the Norwegian Supreme Court decision in the Statoil Angola case from 2007.Norway vs Exxonmobil jan 2018 LB-2016-160306