Tag: Comparable data
These may be internal comparables, i.e. transactions between the tested party and independent parties, or external comparables, i.e. transactions between two independent entities that are not a party to the controlled transaction.
In an Opinion issued on 10 July 2019 on request from the Administrative Court of Versailles, the Conseil d’Etat states as a principle that the arm’s length nature of intra-group interest rate can be demonstrated by reference to comparable unrelated transactions, when these loans constitutes realistic alternatives to the intra-group loan. Excerpt from the Opinion “… 5. The rate that the borrowing enterprise could have obtained from independent financial establishments or organizations under similar conditions means, for the purposes of these provisions, the rate that such establishments or organizations would have been susceptible, account given its own characteristics, in particular its risk profile, to grant it for a loan with the same characteristics under arm’s length conditions. 6. This rate cannot, having regard to the difference in nature between a loan from a financial institution or body and financing by bond issue, be that which this enterprise would itself have been able to serve for subscribers if it had chosen to ... Continue to full case
Argentina vs Compañía Ericsson S.A.C.I., August 2007, Tribunal Fiscal de la Nación, Case No 15/8/2007
/ Argentina, Comparable data, Ericsson, Financial Transactions, Interest rate, intra-group loans, Mobile phones, No written terms, Written agreement
Compañía Ericsson S.A.C.I had received a loan from Ericsson Treasury Services AB – based in Sweden for an amount of $12,000,000. The interest rate had been set at 8,80% The tax authorities considered that the loan had not been agreed at arm’s length – referring to lack of implementation of the loan, the lack of authorization by the board of directors and the lack of guarantee and collateral, taking into account the considerable amount and high level of indebtedness of the company. Decision of the Tax Court The Court ruled in favour of the taxpayer. Agreements between related entities may not be covered by the formal requirements that would be observed between independent parties. Between related parties “the terms of a transaction may arise from correspondence and communications between the parties, rather than from a contract”. “In the present case, observation of the conduct of the entities involved in the transaction does not allow the inference to be drawn that ... Continue to full case