Ikea France (SNC MIF) had concluded a franchise agreement with Inter Ikea Systems BV (IIS BV) in the Netherlands by virtue of which it benefited, in particular, as a franchisee, from the right to operate the ‘Ikea Retail System’ (the Ikea concept), the ‘Ikea Food System’ (food sales) and the ‘Ikea Proprietary Rights’ (the Ikea trade mark) in its shops. In return, Ikea France paid Inter Ikea Systems BV a franchise fee equal to 3% of the amount of net sales made in France, which amounted to EUR 68,276,633 and EUR 72,415,329 for FY 2010 and 2011. These royalties were subject to the withholding tax provided for in the provisions of Article 182 B of the French General Tax Code, but under the terms of Article 12 of the Convention between France and the Netherlands: “1. Royalties arising in one of the States and paid to a resident of the other State shall be taxable only in that other State”, ... Read more

In 2012, Flir Commercial Systems AB sold intangible assets from a branch in Belgium and subsequently claimed a tax relief of more than SEK 2 billion in fictitious Belgian tax due to the sale. The Swedish Tax Agency decided not to allow relief for the Belgian “tax”, and issued a tax assessment where the relief of approximately SEK 2 billion was denied and a surcharge of approximately SEK 800 million was added. An appeal was filed with the Administrative Court, In March 2020 the Administrative Court concluded that the Swedish Tax Agency was correct in not allowing relief for the fictitious Belgian tax. In the opinion of the Administrative Court, the Double tax agreement prevents Belgium from taxing increases in the value of the assets from the time where the assets were owned in Sweden. Consequently, any fictitious tax cannot be credited in the Swedish taxation of the transfer. The Court also considers that the Swedish Tax Agency was correct ... Read more

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 percent. The four French FCPRs were considered transparent for French tax purposes, but non-transparent for Dutch tax purposes. Hence the interest payments were deducted from the taxable income reported by the Group in the Netherlands, but the interest income was not taxed in France – the structure thus resulted in a tax mismatch. The Dutch tax authorities argued that the interest payments should not be deductible as the setup of the financing structure constituted abuse of law; the financing structure was set up in this particular manner to get around a Dutch anti-abuse rule which limits interest deduction on loans from affiliated entities in respect ... Read more

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 rented to the parent company against payment of a consideration, partly due also for the year 2004; d) payment of the consideration for the years of rental is deferred until 31/12/2005. In view of these facts, the tax authorities makes the following contentions: (a) the parent company did not directly purchase the goods and services from the subsidiary because it would not have been able to deduct the VAT due to the fact that it carried out almost all exempt transactions; (b) the subsidiary benefited from a VAT credit for the year 2004 (arising from the purchase of the goods then leased) which was then ... Read more

The Italian Tax Authorities held that the withholding tax exemption under the European Interest and Royalty Directive did not apply to interest paid by Stiga s.p.a. to it’s parent company in Luxembourg. The interest was paid on a loan established in connection with a merger leverage buy out transaction. According to the Tax Authorities the parent company in Luxembourg was a mere conduit and could not be considered as the beneficial owner of the Italian income since the interest payments was passed on to another group entity. The Court rejected the arguments of the Italian Tax Authorities and recognized the parent company in Luxembourg as the beneficial owner of the interest income. In the decision, reference was made to the Danish Beneficial Owner Cases from the EU Court of Justice to clarify the conditions for application of the withholding tax exemption under the EU Interest and Royalty Directive and for determination of beneficial owner status. The Court also found that no ... Read more

In 2013, L SARL requested in writing an “advance tax agreement” regarding the tax treatment of Mandatory Redeemable Preference Shares (MRPS) which generated a preferred dividend for its sole shareholder. L SARL wanted confirmation that the MRPS would be characterised as debt and that payments under the MRPS would therefore be tax deductible. The tax administration issued an advance tax agreement confirming that the content of the request complied with the tax laws and administrative practices in force. However, despite the agreement the tax authorities challenged the 2013 tax return and demanded proof that the return on the MRPS complied with the arm’s length principle. L SARL found that such proof was not necessary since the MRPS’ tax treatment had already been agreed by the tax administration agreement. The tax administration disagreed and issued an assessment. The case was brought before the Administrative Tribunal. The Administrative Tribunal held that an advance tax agreement is binding upon the tax administration where ... Read more

SGL CARBON SPA paid interest on loans received from the German parent of the SGL Group. The tax authorities considered, that the interest rate applied to the intra-group loan was significantly higher than the average interest rate applied in the German market. SGL disagreed and brought the case before the Italien Courts. The Court of first instance ruled in favor of SGL but this decision was set aside by the second instance court. SGL then filed an appeal to the Supreme Court. Judgement of the Supreme Court The Supreme Court dismissed SGL’s appeal. “In view of the above, it is – therefore – quite clear that in the application of the method of “price comparison” preference should be given to the so-called internal comparison, based on the price lists and tariffs of the entity that has supplied the goods or services in the relationship between such entity and an independent company, given that it is to the above-mentioned documentary elements ... Read more