Tag: Adjustment for depreciation/amortisation

Italy vs Mauser S.p.A., February 2022, Supreme Court, Case No 6283/2022

Italy vs Mauser S.p.A., February 2022, Supreme Court, Case No 6283/2022

Following an audit, Mauser S.p.A. received four notices of assessment relating to the tax periods from 2004 to 2007. These notices contested, in relation to all tax periods, the elusive purpose of a financing operation of Mauser S.p.A. by the non-resident parent company, as it was aimed at circumventing the non-deductibility of interest expense pursuant to Article 98 pro tempore of Presidential Decree No. 917 of 22 December 1986 (TUIR) on the subject of thin capitalisation. The loan, which began in 2004, had resulted in the recognition of €25,599,000.00 among other reserves, indicated as a payment on account of a future capital increase, as well as €55,040,474.29 as an interest-bearing shareholder loan, the latter of which was subsequently partly waived and also transferred to reserves. The loan had also contributed to the generation of losses in the years in question, which had been covered through the use of the aforementioned reserve (as a reserve), whose interest paid to the parent ... Read more

TPG2022 Chapter II paragraph 2.106

“Berry ratios” are defined as ratios of gross profit to operating expenses. Interest and extraneous income are generally excluded from the gross profit determination; depreciation and amortisation may or may not be included in the operating expenses, depending in particular on the possible uncertainties they can create in relation to valuation and comparability ... Read more

TPG2022 Chapter II paragraph 2.90

Difficult comparability issues can arise where the accounting treatment of some items by potential third party comparables is unclear or does not allow reliable measurement or adjustment (see paragraph 2.81). This can be the case in particular for depreciation, amortisation, stock option and pension costs. The decision whether or not to include such items in the determination of the net profit indicator for applying the transactional net margin method will depend on a weighing of their expected effects on the appropriateness of the net profit indicator to the circumstances of the transaction and on the reliability of the comparison (see paragraph 3.50) ... Read more
El Salvador vs "E-S. Sales Corp", December 2020, Tax Court, Case No R1705038.TM

El Salvador vs “E-S. Sales Corp”, December 2020, Tax Court, Case No R1705038.TM

Following an audit the tax authorities issued an assessment regarding various intra group costs of sales deducted for tax purposes by “E-S. Sales Corp”. An appeal was filed by the company. Judgement of the Tax Court The court partially upheld the assessment, but in regards of application of the OECD Transfer Pricing Guidelines, the assessment was set aside. For the years in question the OECD guidelines had not yet been implemented by El Salvador. Excerpt “In this regard, it should be noted that the seventh paragraph of the aforementioned article provides that “””If, for any reason, the market price cannot be determined, the Tax Administration shall establish it by adopting the price or the amount of the consideration that the taxpayer under audit has received from purchasers of goods or providers of unrelated services other than those to whom it transferred goods or provided services at a price lower or higher than the market price”””. Therefore, if it had been ... Read more

TPG2017 Chapter II paragraph 2.106

“Berry ratios” are defined as ratios of gross profit to operating expenses. Interest and extraneous income are generally excluded from the gross profit determination; depreciation and amortisation may or may not be included in the operating expenses, depending in particular on the possible uncertainties they can create in relation to valuation and comparability ... Read more

TPG2017 Chapter II paragraph 2.90

Difficult comparability issues can arise where the accounting treatment of some items by potential third party comparables is unclear or does not allow reliable measurement or adjustment (see paragraph 2.81). This can be the case in particular for depreciation, amortisation, stock option and pension costs. The decision whether or not to include such items in the determination of the net profit indicator for applying the transactional net margin method will depend on a weighing of their expected effects on the appropriateness of the net profit indicator to the circumstances of the transaction and on the reliability of the comparison (see paragraph 3.50) ... Read more