“Forward KT Limited” submitted a report on controlled transactions for 2013 to the tax authority on 13 May 2015. The tax authority found that Forward KT Limited had failed to submit the report within the filing deadline of 1 October 2014. In an appeal “Forward KT Limited” claimed that within the meaning of Article 39 24 of the Tax Code of Ukraine, transactions where one party is a non-resident registered in a country where the income tax rate is 5 percentage points or more lower than in Ukraine, provided that the amount of such transactions exceeds UAH 50 million during a calendar year, are considered controlled. The Republic of Cyprus was included in the list of such countries from 25 December 2013, and the total amount of transactions with a non-resident for the period from 25 December 2013 to 31 December 2013 was only UAH 25.5 million. The Administrative Court dismissed the claim in a ruling later upheld by the ... Read more

The German BASF group is active in the chemical industry and has subsidiaries all over the world including Italy. In FY 2006 BASF Italia s.p.a. was served with two notices of assessment by the tax authorities. The tax assessments formulated three findings. 1. non-deductibility of the cancellation deficit – arising from the merger by incorporation of Basf Agro s.p.a. into Basf Italia s.p.a., resolved on 27 April 2004 – which the acquiring company had allocated to goodwill, the amortisation portions of which had been deducted in tenths and then, from 2005, in eighteenths. The Office had denied the deductibility on the ground that the company, in the declaration submitted electronically, had not expressly requested, as required by Article 6(4) of Legislative Decree No. 358 of 8 October 1997, the tax recognition of the greater value of goodwill recorded in the balance sheet to offset the loss from cancellation, as allowed by paragraphs 1 and 2 of the same provision. Moreover, ... Read more

Vincenzo Zucchi spa is an Italian company that operates in the textile sector. Following an audit an assessment was issued related to various controlled transaktions – deductions for bad debt, deductions for costs, lack of income on a loan, income from sale of goods to foreign subsidiaries, cost of goods and services purchased from subsidiaries in non EU countries, costs of employees VAT etc. The adjustment was partially upheld and partially dismissed by the Court of Appeal. An appeal and cross appeal was then filed with the Supreme Court by the tax authorities and Vincenzo Zucchi. Among the objections in the cross appeal filed by Vincenzo Zucchi was a claim stating that transfer pricing rules were not applicable in the case since the group was using global tax consolidation. Judgement of the Supreme Court The Supreme Court upheld the second plea in the main appeal (undue deduction of costs charged by the subsidiary Basitalia Leasing S.p.A.), rejecting all the other ... Read more

The Brazilian group Marcopolo assembles bus bodies in Brazil for export. It used two related offshore companies, Marcopolo International Corporation, domiciled in the British Virgin Islands, and Ilmot International Corporation, domiciled in Uruguay, in a re-invoicing arrangement whereby the product was shipped from Marcopolo to the customers but the final invoice to the customers was issued by the related companies. The tax authorities found that the arrangement lacked business purpose and economic substance and, on this basis, disregarded the transactions. Decision of the Administrative Court of Appeal The Court ruled in favour of Marcopolo SA. The Court found that, although the offshore companies did not perform any functions other than invoicing sales and contract functions, if the transfer pricing methodology was complied with, the minimum profitability required by the anti-avoidance rule was sufficient for the set-up to be considered legal. Click here for English Translation Click here for other translation 140200752_11020004863200719_201109 ... Read more