Tag: Commodities

§ 1.482-9(c)(5)(i) In general.

The price of a comparable uncontrolled services transaction may be derived based on indirect measures of the price charged in comparable uncontrolled services transactions, but only if – (A) The data are widely and routinely used in the ordinary course of business in the particular industry or market segment for purposes of determining prices actually charged in comparable uncontrolled services transactions; (B) The data are used to set prices in the controlled services transaction in the same way they are used to set prices in uncontrolled services transactions of the controlled taxpayer, or in the same way they are used by uncontrolled taxpayers to set prices in uncontrolled services transactions; and (C) The amount charged in the controlled services transaction may be reliably adjusted to reflect differences in quality of the services, contractual terms, market conditions, risks borne (including contingent-payment terms), duration or quantitative measure of services rendered, and other factors that may affect the price to which uncontrolled taxpayers would agree ... Read more
Norway vs Equinor Energy AS, August 2022, Court of Appeal, Case No LB-2021-126759

Norway vs Equinor Energy AS, August 2022, Court of Appeal, Case No LB-2021-126759

The case concerned pricing of the wet gas in FY 2012-2014 sold between Equinor Energy (subsidiary) and Equinor ASA (parent). The intra-group sales from Equinor Energy to Equinor were regulated by an internal agreement that was entered into as part of the transfer of rights in 2009. The income that Equinor Energy receives from the internal sales is subject to section 5 of the Petroleum Tax Act with a special tax that comes in addition to the general income tax. This means that Equinor Energy had a total tax burden of 78%. Equinor, for its part, is charged with ordinary income tax, which was 27/28%. In 2012 the pricing model was changed rom the so-called “OTS price model” to a “dividend model”, which led to the price (and taxable income in Equinor Energy) being reduced compared to the previously used pricing model. The reason stated by the group for this change was that Equinor Energy had later entered into an agreement ... Read more
Rio Tinto has agreed to pay AUS$ 1 billion to settle a dispute with Australian Taxation Office over its Singapore Marketing Hub

Rio Tinto has agreed to pay AUS$ 1 billion to settle a dispute with Australian Taxation Office over its Singapore Marketing Hub

On 20 July 2022 Australian mining group Rio Tinto issued a press release announcing that a A$ 1 billion settlement had been reached with the Australian Taxation Office. “The agreement resolves the disagreement relating to interest on an isolated borrowing used to pay an intragroup dividend in 2015. It also separately resolves the pricing of certain transactions between Rio Tinto entities based in Australia and the Group’s commercial centre in Singapore from 2010-2021 and provides certainty for a further five-year period. Rio Tinto has also reached agreement with the Inland Revenue Authority of Singapore (IRAS) in relation to transfer pricing for the same periods. Reaching agreement with both tax authorities ensures Rio Tinto is not subject to double taxation. As part of this agreement, Rio Tinto will pay to the ATO additional tax of A$613m for the twelve historical years (2010 to 2021). This is in addition to the A$378m of tax paid in respect of the original amended assessments ... Read more
Ukrain vs PrJSC "Poltava GZK", June 2022, Supreme Court, Case No 440/1053/19

Ukrain vs PrJSC “Poltava GZK”, June 2022, Supreme Court, Case No 440/1053/19

Poltova GZK is a Ukrainian subsidiary of the Ferrexpo group – the world’s third largest exporter of iron ore pellets. In FY 2015 the iron ore mined in Ukraine by Poltava GZK was sold to other companies in the group – Ferrexpo Middle East FZE, and the transfer prices for the ore was determined by application of the CUP method using Platts quotations. However, according to the tax authorities Poltava GZK used Platts quotations for pellets with a lower iron content when pricing the higher quality pellets, resulting in non arm’s length prices for the controlled transactions and lower profits in the Ukraine subsidiary. The tax authorities also found that Poltava GZK had overestimated the cost of freight – in the case of actual transportation of pellets by ships of different classes (“Panamax”, “Capesize”), the adjustment of the delivery conditions was carried out only at the maximum rate. On that basis an assessment was issued. Not satisfied with the assessment ... Read more
Norway vs Neptune Energy Norge AS, February 2022, Court of Appeal, Case No LG-2021-8008 – UTV-2022-697

Norway vs Neptune Energy Norge AS, February 2022, Court of Appeal, Case No LG-2021-8008 – UTV-2022-697

The question in the case was whether a Norwegian company had received an arm’s length price when selling gas to a French company in the same group. Judgement of the Court of Appeal The Court of Appeal came to the conclusion that the agreed transfer price had not been at arm’s length and this meant a reduction in income for the Norwegian company. The Appeal Board for Petroleum Tax’s decision was upheld.  Click here for English translation. Click here for other translation LG-2021-8008-–-UTV-2022-697-ORG ... Read more
Latvia vs SIA Severstal Distribution, December 2021, Administrative Court of Appeal, Case No A420576312, SKA-314/2021

Latvia vs SIA Severstal Distribution, December 2021, Administrative Court of Appeal, Case No A420576312, SKA-314/2021

The Revenue Service had audited Severstal Distribution for FY 2008-2009 and found that the company had purchased metal products from related companies at prices above market prices. An assessment was issued where reported losses for 2009 were reduced. During the audit, Severstal Distribution indicated to the tax authorities that it had used the transactional net margin method to determine the price of its controlled transactions. However, later the company also stated that it had used the CUP method (quated steel prices from the SBB database). Severstal Distribution Ltd filed an appeal with the Administrative Regional Court. In a decision of 2019 the appeal was dismissed and the assessment of additional income upheld. An appeal was then filed by Severstal Distribution Ltd with the Administrative Court of Appeal. The issue to be examined by the Administrative Court of Appeal was whether the Revenue Service correctly determined Severstal Distribution’s income subject to corporate income tax by applying the arm’s length provisions in ... Read more
Zambia vs Mopani Copper Mines Plc., May 2020, Supreme Court of Zambia, Case No 2017/24

Zambia vs Mopani Copper Mines Plc., May 2020, Supreme Court of Zambia, Case No 2017/24

Following an audit of Mopani Copper Mines Plc. the Zambian Revenue Authority (ZRA) found that the price of copper sold to related party Glencore International AG had been significantly lower than the price of copper sold to third parties. A tax assessment was issued where the ZRA concluded that the internal pricing had not been determined in accordance with the arm’s length principle, and further that one of the main purposes for the mis-pricing had been to reduce tax liabilities. Mopani Copper Mines Plc. first appealed the decision to Zambia’s Tax Appeal Tribunal, and after a decision was handed down by the Tribunal in favor of the ZRA, a new appeal was filed with the Supreme Court. The Supreme Court dismissed Mopani’s appeal and ruled in favor of the ZRA. App-024-2017-Mopani-Copper-Mines-Plc-Vs-Zambia-Revenue-Authority-20th-May-2020-Mambilima-Cj-Malila-And-Mutuna-JJS ... Read more
Ukrain vs Rivneazot, September 2019, Supreme Administrative Court, Case No 817/1737/17

Ukrain vs Rivneazot, September 2019, Supreme Administrative Court, Case No 817/1737/17

The Ukrainian group Rivneazot imports natural gas from – and exports mineral to – foreign related companies. The tax authority carried out an audit and concluded that the controlled prices of these transactions had not been determined in accordance with the arm’s length principle, which had resulted in an understatement of taxable income. Rivneazot disagreed. According to the company the CUP method had correctly been applied to the controlled natural gas import transactions and the TNMM had correctly been applied to the controlled export transactions. In 2018 the Administrative Court decided in favor of Rivneazon and set aside the tax assessment. The court concluded that information provided by the company were sufficient to use the preferred CUP method with a defined market price range for natural gas. The decision was then appealed to the Administrative Court of Appeals. The Court of Appeal upheld the decision of the Administrative court. This decision was then appealed by the tax authorities to the ... Read more
Hungary vs "Seeds Kft", September 2018, Supreme Administrative Court, Curia No. Kfv. VI. 35.585/2017

Hungary vs “Seeds Kft”, September 2018, Supreme Administrative Court, Curia No. Kfv. VI. 35.585/2017

The Hungarian tax office had carried out an an audit of “Seeds Kft” – a group company engaged in the trade in cereals and oilseeds – in relation to accounting for commodity futures. In the assessment decision, the tax office emphasized that the economic substance of the given transaction and the purpose to be achieved by the transaction are relevant. Clearing transactions are not settled by the delivery of the underlying commodities of the transaction and the payment of the forward price, but by financial settlement of the difference between the market price of the commodity and the forward price. With regard to the transfer pricing documentation, the tax office agreed with the pricing method chosen by Seeds Kft but found the application thereof arbitrary and therefore not resulting in establishment of a market price. The Court of First Instance found the tax office’s claim to be partly well-founded and ordered the tax authorities to reopen the proceedings. On the ... Read more