Tag: Advertising

TPG2022 Chapter VI Annex I example 21

TPG2022 Chapter VI Annex I example 21

73. Första is a consumer goods company organised and operating in country A. Prior to Year 1, Första produces Product Y in country A and sells it through affiliated distribution companies in many countries around the world. Product Y is well recognised and attracts a premium compared to its competitors, to which Första is entitled as the legal owner and developer of the trademark and related goodwill giving rise to that premium. 74. In Year 2, Första organises Company S, a wholly owned subsidiary, in country B. Company S acts as a super distributor and invoicing centre. Första continues to ship Product Y directly to its distribution affiliates, but title to the products passes to Company S, which reinvoices the distribution affiliates for the products. 75. Beginning in Year 2, Company S undertakes to reimburse the distribution affiliates for a portion of their advertising costs. Prices for Product Y from Company S to the distribution affiliates are adjusted upward so ... Read more
Czech Republic vs. LCN GROUP s.r.o., July 2021, Supreme Administrative Court, Case No 2 Afs 148/2020 - 37

Czech Republic vs. LCN GROUP s.r.o., July 2021, Supreme Administrative Court, Case No 2 Afs 148/2020 – 37

LCN Group had deducted costs in its taxable income for marketing services provided by related parties – PRESSTEX MEDIA SE and TARDEM Media s.r.o. and PAPILIO. The claimed advertising costs from PRESSTEX in FY 2012 was produced and implemented by PAPILIO and subsequently invoiced to LCN Group, virtually unchanged, at a price 23 times higher than the price of the advertising, without the corresponding value added being justified. In relation to FY 2013, LCN Group claimed advertising costs from TARDEM in a similar pattern where the price was increased by up to 56 times. In both tax periods, LCN Group’s advertising/promotion costs were related to sporting events (gymnastics world cup, tennis tournament and golf tournaments). The tax authorities concluded that the prices agreed between the parties was not at arm’s length and issued an assessment. The Regional Court annulled the assessment. It argued that the tax authorities had not sufficiently dealt with the identification and description of the conditions under ... Read more
Austria vs S GmbH, November 2020, Verwaltungsgerichtshof, Case No Ra 2019/15/0162-3

Austria vs S GmbH, November 2020, Verwaltungsgerichtshof, Case No Ra 2019/15/0162-3

S GmbH was an Austrian trading company of a group. In the course of business restructuring, the real estate division of the Austrian-based company was initially separated from the “trading operations/brands” division on the demerger date of 31 March 2007. The trademark rights remained with the previous trading company, which was the parent company of the group, now M GmbH. On 25 September 2007, M GmbH transferred all trademark rights to a permanent establishment in Malta, which was set up in the same year, to which it also moved its place of management on 15 January 2008. Licence agreements were concluded between S GmbH and M GmbH, which entitle S GmbH to use the trademarks of M GmbH for advertising and marketing measures in connection with its business operations in return for a (turnover-dependent) licence fee. The tax authorities (re)assessed the corporate income tax for the years 2008 and 2009. The audit had shown that the licence fees were to ... Read more
Czech Republic vs. LCN Group s.r.o., April 2020, Regional Court, Case No 25 Af 76/2019 - 42

Czech Republic vs. LCN Group s.r.o., April 2020, Regional Court, Case No 25 Af 76/2019 – 42

LCN Group s.r.o. had deducted costs in its taxable income for marketing services provided by related parties. Following an audit, the tax authorities concluded that the prices agreed between the parties was not at arm’s length and issued an assessment. Decision of the Regional Court The Regional Court annulled the assessment and decided in favor of the LNC Group. The court held that the tax authorities had not sufficiently dealt with the identification and description of the conditions under which the prices of the controlled transactions had been agreed. The tax authorities had not considered the “commercial strength” and “advertising capacity” of the parties. Click here for English Translation Click here for other translation Czech 25Af_76_20200609112810.2019_prevedeno ... Read more
Czech Republic vs. ACTRAD s.r.o., February 2020, Supreme Administrative Court, No. 7 Afs 176/2019 - 26

Czech Republic vs. ACTRAD s.r.o., February 2020, Supreme Administrative Court, No. 7 Afs 176/2019 – 26

The issue in this case was the pricing of advertising services acquired by ACTRAD s.r.o. from related parties PRESSTEX PRINT and PRESSTEX MEDIA . According to the authorities ACTRAD instead of acquiring advertising and promotional services directly from the sports clubs (which was possible), used the services of intermediaries PRESSTEX PRINT and PRESSTEX MEDIA, who increased the price of the services provided significantly (290, 229 and 102 times), without adding any value to the transaction. The final price paid for the advertisement thus increased 290 times in 2011, 229 times in the first half of 2012 and 102 times in the second half of 2012 compared to the initial invoice. This increase occurred while the content, scope and form of the services remained unchanged. The result of the arrangement was a reduction in the tax bases of ACTRAD s.r.o. The tax authorities issued an assessment of additional income taxes for FY 2011 and 2012 in a total amount of ~CZK ... Read more
Czech Republic vs. Eli Lilly ČR, s.r.o., December 2019, District Court of Praque, No. 6 Afs 90/2016 - 62

Czech Republic vs. Eli Lilly ČR, s.r.o., December 2019, District Court of Praque, No. 6 Afs 90/2016 – 62

Eli Lilly ČR imports pharmaceutical products purchased from Eli Lilly Export S.A. (Swiss sales and marketing hub) into the Czech Republic and Slovakia and distributes them to local distributors. The arrangement between the local company and Eli Lilly Export S.A. is based on a Service Contract in which Eli Lilly ČR is named as the service provider to Eli Lilly Export S.A. (the principal). Eli Lilly ČR was selling the products at a lower price than the price it purchased them for from Eli Lilly Export S.A. According to the company this was due to local price controls of pharmaceuticals. Eli Lilly ČR was also paid for providing marketing services by the Swiss HQ, which ensured that Eli Lilly ČR was profitable, despite selling the products at a loss. Eli Lilly ČR reported the marketing services as a provision of services with the place of supply outside of the Czech Republic; therefore, the income from such supply was exempt from ... Read more
Czech Republic vs. J.V., May 2019, Supreme Administrative Court, Case No 2 Afs 131/2018 - 59

Czech Republic vs. J.V., May 2019, Supreme Administrative Court, Case No 2 Afs 131/2018 – 59

For FY 2007, 2008 and 2009, JV had deducted expenses consisting in the payment for services pursuant to invoices issued by BP Property s.r.o. and TOP ZONEVIEW. The services consisted in the provision and implementation of an advertising campaign. Following an audit the tax authorities adjusted JV’s taxable income by the difference found, since pursuant to Article 23(7)(b)(5) of the Income Tax Act, the prices agreed differed from the prices which would have been agreed between unrelated parties in normal commercial relations under the same or similar conditions. JV contested the decision of the tax authorities but the appeal was dismissed by the Regional Court. The Regional Court held that the applicant’s objection – that he did not know and could not have known about the chain because he had dealt only with the managing director of Property Praha or B.V. – was unfounded. Section 23(7)(b)(5) of the Income Tax Act does not require proof of active conduct of all ... Read more
Mexico vs "Drink Distributor S.A.", April 2019, TRIBUNAL FEDERAL DE JUSTICIA ADMINISTRATIVA, Case No 15378/16-17-09-2/1484/18-S2-08-04

Mexico vs “Drink Distributor S.A.”, April 2019, TRIBUNAL FEDERAL DE JUSTICIA ADMINISTRATIVA, Case No 15378/16-17-09-2/1484/18-S2-08-04

“Drinks Distributor S.A.” was involved in purchase, sale and distribution of alcoholic beverages in Mexico. “Drinks Distributor s.a” had entered into a non-exclusive trademark license agreement with a related party for the sale of its product. Following a restructuring process, the related party moved to Switzerland. Following an audit the Mexican tax administration, determined that deductions for marketing and advertising costs related to brands and trademarks used under the licensing agreement, were not “strictly indispensable” and therefore not deductible, cf. requirement established by the Income Tax Law in Mexico. Drinks Distributor S.A on its side held that the marketing and advertising costs were strictly indispensable and that the tax deductions should be accepted. The dispute ended up in the Federal Court of Administrative Justice. Judgement: The Court determined what should be understood as “strictly indispensable“. To establish this concept the purposes of the specific company and the specific costs must first be determined – in particular that the costs are ... Read more
Czech Republic vs. JN TRANS s.r.o., November 2014, Supreme Administrative Court, Case No 9 Afs 92/2013

Czech Republic vs. JN TRANS s.r.o., November 2014, Supreme Administrative Court, Case No 9 Afs 92/2013

In this case the court accepted the tax authorities’ procedure for determining the arm’s length price for advertising services, whereby the tax authorities took into account conditions such as the size of the advertising space, the type of event, the duration of the advertising, etc., when comparing controlled and uncontrolled transactions The appeal of JN Trans was dismissed by the court. Click here for English Translation Click here for other translation Czech Case No 9 Afs 92-2013 ... Read more
France vs. Nestlé water, Feb. 2014, CAA no 11VE03460

France vs. Nestlé water, Feb. 2014, CAA no 11VE03460

In the French Nestlé water case, the following arguments were made by the company: The administration, which bears the burden of proof under the provisions of Article 57 of the General Tax Code, of paragraphs 38, 39 and 42 of the Instruction 13 l-7-98 of 23 July 199 8 and case law, does not establish the presumption of indirect transfer of profits abroad that would constitute the payment of a fee to the Swiss companies A … SA, company products A … SA and Nestec SA. The mere fact that the association of the mark A … with the mark Aquarel also benefits company A … SA, owner of the mark A …, does not allow to prove the absence of profit and thus of consideration for NWE. The latter company also benefited from the combination of the two brands. Advertising alone are not enough to characterize an indirect transfer of profits abroad; in any case, the administration does not ... Read more