The tax authority, based on the results of an audit, found that the prices in controlled export transactions of goods, carried out between “LK Ukraine Group” and related parties, did not comply with the arm’s length principle, i.e. the selling prices of the goods were lower than the minimum values of the arm’s length range. Disagreeing with this conclusion, “LK Ukraine Group” stated that the the method applied by the tax authority during the audit of prices in controlled transactions was unlawful and inappropriate due to the lack of information on all possible costs. At the request of the supervisory authority, “LK Ukraine Group” provided evidence that when determining the prices of goods, the group was guided by information based on monitoring, in particular, prices on the Euronext exchange, namely, the average selling prices of agricultural products on the terms of delivery EXW-port, which refuted the assertion of the authority that the controlled transactions did not comply with the arm’s ... Read more

Singapore Telecom Australia Investments Pty Ltd entered into a loan note issuance agreement (the LNIA) with a company (the subscriber) that was resident in Singapore. Singapore Telecom Australia and the subscriber were ultimately 100% owned by the same company. The loan notes issued totalled approximately $5.2 billion to the subscriber. The terms of the LNIA was amendet on three occasions – the first amendment and the second amendment were expressed to have effect as from the date when the LNIA was originally entered into. The interest rate under the LNIA as amended by the third amendment was 13.2575% Following an audit the tax authorities issued an amended assessment under the transfer pricing provisions and denied interest deductions totalling approximately $894 million in respect of four years of income. According to the tax authorities the conditions agreed between the parties differed from the arm’s length principle. Singapore Telecom Australia appealed the assessment to the Federal Court. Judgement of the Federal Court ... Read more

The issue in these two cases is whether withholding tax was payable on interest paid to foreign group companies considered “beneficial owners” via conduit companies covered by the EU Interest/Royalties Directive and DTA’s exempting the payments from withholding taxes. The first case concerned interest accruals totalling approximately DKK 1,476 million made by a Danish company in the period 2007-2009 in favour of its parent company in Sweden in connection with an intra-group loan. The Danish Tax Authorities (SKAT) subsequently ruled that the recipients of the interest were subject to the tax liability in Section 2(1)(d) of the Corporation Tax Act and that the Danish company was therefore obliged to withhold and pay withholding tax on a total of approximately DKK 369 million. The Danish company brought the case before the courts, claiming principally that it was not obliged to withhold the amount collected by SKAT, as it disputed the tax liability of the recipients of the interest attributions. The second ... Read more

A new huge leak of financial records revealed by ICIJ, once again shows widespread use of offshore accounts, shell companies and trusts to hide wealth and/or avoid taxes. The new leak is known as the Pandora Papers and follows other recent leaks – lux leak, panama papers, paradise papers. The International Consortium of Investigative Journalists obtained 11.9 million confidential documents from 14 separate legal and financial services firms, which the group said offered “a sweeping look at an industry that helps the world’s ultrawealthy, powerful government officials and other elites conceal trillions of dollars from tax authorities, prosecutors and others.” “The key players in the system include elite institutions – multinational banks, law firms and accounting practices – headquartered in the U.S. and Europe.” The Consortium said the 2.94 terabytes of financial and legal data shows the “offshore money machine operates in every corner of the planet, including the world’s largest democracies,” and involves some of the world’s most well-known ... Read more

Nidera S.A. exported commodities (cereals, oilseeds etc.) via group traders domiciled on the British Virgin Islands. In the absence of evidence to the contrary, in transactions involving entities domiciled in low-tax jurisdictions, it was presumed that prices had not been agreed in accordance with the arm’s length principle. The tax authorities issued an adjustment by applying the “CUP” method (Sixth method), considering the statistical average prices set as a reference value by the National Secretariat of Agriculture, Livestock and Fisheries, corresponding to the date of shipment (and not to the date of agreement as claimed by the claimant). However adjustments were only made to those transactions where the quoted price was higher than the one agreed by Nidera S.A. An appeal was filed with the National Court by Nidera S.A. In 2016 the National Court of Appeals issud ist decision in the case. The decision was in favour of Nidera S.A. in regards to the approach of the tax authorities ... Read more

In 2013, Snowy Owl Energy Inc entered into a Consultancy Agreement (Subconsultant Services Agreement) with Rolenergy Inc. – a Hong Kong-based corporation organized and registered in the British Virgin Islands. Based on the Agreement, Rolenergy would serve as Snowy Owl Energy Inc’s sub-consultant. The tax authorities issued an assessment for deficiency income tax (IT), final withholding tax (FWT) and compromise penalty in relation to the sub-consultant fees it paid for taxable year 2013. Judgement of the Tax Court The Court decided in favour of Snowy Owl Energy Inc. Section 23(F)36 in relation to Section 42(C)(3)37 of the NIRC of 1997, as amended, provides that a non-resident foreign corporation is taxable only for income from sources within the Philippines, and does not include income for services performed outside the Philippines. Excerpts: “Indubitably, the payments made in exchange for the services rendered in Hong Kong are income derived from sources outside of the Philippines, thus not subject to IT and consequently to ... Read more

C. SA provides “services, in particular in the areas of communication, management, accounting, management and budget control, sales development monitoring and employee training for the group to which it belongs, active in particular in the field of “F”. C. SA is part of an international group of companies, G. group, whose ultimate owner is A. The G group includes H. Ltd, based in the British Virgin Islands, I. Ltd, based in Guernsey and J. Ltd, also based in Guernsey. In 2005, K. was a director of C. SA. On December 21 and December 31, 2004, an exclusive agreement for distribution of “F” was entered into between L. Ltd, on the one hand, and C. SA , H. Ltd and J. Ltd, on the other hand. Under the terms of this distribution agreement, L. Ltd. undertook to supply “F” to the three companies as of January 1, 2005 and for a period of at least ten years, in return for payment ... Read more

C. SA provides “services, in particular in the areas of communication, management, accounting, management and budget control, sales development monitoring and employee training for the group to which it belongs, active in particular in the field of “F”. C. SA is part of an international group of companies, G. group, whose ultimate owner is A. The G group includes H. Ltd, based in the British Virgin Islands, I. Ltd, based in Guernsey and J. Ltd, also based in Guernsey. In 2005, K. was a director of C. SA. On December 21 and December 31, 2004, an exclusive agreement for distribution of “F” was entered into between L. Ltd, on the one hand, and C. SA , H. Ltd and J. Ltd, on the other hand. Under the terms of this distribution agreement, L. Ltd. undertook to supply “F” to the three companies as of January 1, 2005 and for a period of at least ten years, in return for payment ... Read more

By Javier Garcia-Bernardo, Jan Fichtner, Frank W. Takes, & Eelke M. Heemskerk Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identifcation of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate ... Read more

Oxfam’s list of Tax Havens, in order of significance are: (1) Bermuda (2) the Cayman Islands (3) the Netherlands (4) Switzerland (5) Singapore (6) Ireland (7) Luxembourg (8) Curaçao (9) Hong Kong (10) Cyprus (11) Bahamas (12) Jersey (13) Barbados, (14) Mauritius and (15) the British Virgin Islands. Most notably is The Netherlands placement as no. 3 on the list. Oxfam researchers compiled the list by assessing the extent to which countries employ the most damaging tax policies, such as zero corporate tax rates, the provision of unfair and unproductive tax incentives, and a lack of cooperation with international processes against tax avoidance (including measures to increase financial transparency). Many of the countries on the list have been implicated in tax scandals. For example Ireland hit the headlines over a tax deal with Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate in the country. And the British Virgin Islands is home to more ... Read more

Nidera S.A. exported commodities (cereals, oilseeds etc.) via group traders domiciled on the British Virgin Islands. In the absence of evidence to the contrary, in transactions involving entities domiciled in low-tax jurisdictions, it was presumed that prices had not been agreed in accordance with the arm’s length principle. The tax authorities issued an adjustment by applying the “CUP” method (Sixth method), considering the statistical average prices set as a reference value by the National Secretariat of Agriculture, Livestock and Fisheries, corresponding to the date of shipment (and not to the date of agreement as claimed by the claimant). However adjustments were only made to those transactions where the quoted price was higher than the one agreed by Nidera S.A. Judgement of the Court The National Court accepted Nidera S.A.’s appeal in regards to the approach of the tax authorities were only the unfavorable pricing were being adjusted whereas the favorable pricing were not, and referred the case back to the ... Read more

This case is about extensive tax evasion set up by the tax manager of the Asian Agri Group. According to the tax authorities income from export sales had been manipulated. Products were sent directly to the end buyer, whereas the invoices recorded that the products were first sold to companies in Hong Kong and then sold to a company in Macau or the British Virgin Islands before they were finally sold to the end buyer. The intermediary companies were proven to have been used only for the purpose of lowering the taxable income by under-invoicing the sales prices compared to the sales price to the end buyer. Various fees had also been deducted from the companies income to further lower the tax payment. These included a “Jakarta fee”, a Hedging fee and a Management fee. Judgement of the Supreme Court The court ruled that the tax manager was guilty of submitting an incorrect or incomplete tax return. On that basis ... 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

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 final customers but the final invoice to the customers was issued by the offshore 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. According to the Court, the transactions with the offshore companies had a business purpose and were therefore legitimate tax planning. Excerpts “6. The absence of an operational structure of the companies controlled by the Appellant, capable of supporting the transactions performed, even if, in isolation, it could be admitted within the scope of a “rational organization of the economic activity”, in the case at hand, ... Read more