Spain vs EPSON IBÉRICA S.A.U., Feb 2018, High Court, Case No 314/2016

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EPSON IBÉRICA S.A.U. had deducted the full employee pension costs of a CEO that had worked both for the HQ in the Netherlands and the local Spanish Company.

The tax authorities issued an assessment where 90% of the pension costs had been disallowed in regards to the taxable income in Spain. The disallowed percentage of the costs was based on the CEO’s salary allocation between Netherlands (90%) and Spain (10%), cf. the agreement entered between the parties.

EPSON IBÉRICA S.A.U. brought the assessment to the Courts.

Judgement of the Court

The High Court dismissed the appeal of EPSON IBÉRICA S.A.U. and decided in favour of the tax authorities.

…this Chamber shares and endorses the detailed reasoning of the TEAC starting from a fundamental fact, that if the contract of 25 June 2004, firmado between Mr. Humberto and Sek, by which the latter was appointed as Riji of Epson, Chairman of Epson Europe BV and President of Epson Ibérica, S.A.U. and of Epson Portugal Informática, S.A., established a distribution of 90% and 10% to be paid by Epson Europe BV and Epson Ibérica SAU, respectively, in order to satisfy the bonus to Mr Hiji, in line with the time worked by Mr Hiji for each of the companies, it is logical that that same proportion should be maintained in respect of the other EUR 2.2 million, as a result of the ‘Your Retirement Package’ and not, as the applicant claims, that that amount should be paid in full by the present appellant.
The fact that Mr Humberto had devoted his whole life to the present appellant, before it was called Epson Ibérica, SAU and was absorbed by the multinational group Epson, it was called Tradeteck, is not an obstacle to the inclusion obtained, on the basis not only, as the Inspectorate states, ‘that what he worked until 1986 he would already have received’, but also that it is not congruent with what happened after 2002, the date on which Mr Humberto was appointed President of Epson Europe. BV, a situation or cause from which the contract of 29 June 2004, referred to above, arose.
The reasoning of the claim, despite the argumentative effort of the governing document, cannot be admitted, without the invocation of the transfer prices referred to therein being relevant for the resolution of the issue at hand.
As regards the impossibility of the bilateral adjustment, we refer to the contested decision. In definitive, the plea must be rejected.

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SP vs EPSON SAN_1065_2018

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