Tag: Converted into a commissionaire

Denmark vs. Software A/S, September 2020, Tax Court, Case no SKM2020.387.LSR

Denmark vs. Software A/S, September 2020, Tax Court, Case no SKM2020.387.LSR

Software A/S was a fully fledged Danish distributor of software an related services up until 2010 where the company was converted into a commissionaire dealing on behalf of a newly established sales and marketing hub in Switzerland. Following an audit, the Danish tax authorities issued a assessment where additional taxable income from the transfer of intangibles to Switzerland in 2010 had been determined by application of the DCF valuation model. As no transfer pricing documentation had been prepared on the transfer, the assessment was issued on a discretionary basis. Software A/S filed a complaint to the Danish Tax Court. The Tax Court found that the tax authorities did not have the authority to make a discretionary assessment. It was emphasized that the company in its transfer pricing documentation had described the relevant circumstances for the restructuring. Furthermore, the company had analyzed functions and risks and prepared comparability analyzes for transactions before and after the restructuring. However, the Tax Court found ... Continue to full case

TPG2017 Chapter IX paragraph 9.23

For instance, where a full-fledged distributor is converted into a limited-risk distributor or commissionnaire resulting in the reduction or elimination of risks relating to inventory in the restructured enterprise, in order to determine whether such risk is economically significant the tax administration may want to analyse: The role of inventory in the business model (for example, speed to market, comprehensive range), The nature of the inventory (for example, spare parts, fresh flowers), The level of investment in inventory, The factors giving rise to inventory write-downs or obsolescence (for example, perishability, pricing pressures, speed of technical improvements, market conditions), The history of write-down and stock obsolescence, and whether any commercial changes affect the reliability of historic performance as an indicator of current risk, The cost of insuring against damage or loss of inventory, and The history of damage or loss (if uninsured) ... Continue to full case

TPG2017 Chapter IX paragraph 9.15

Restructurings can take a variety of different forms and may involve two or more members of an MNE group. For example, a simple pre-restructuring arrangement could involve a full-fledged manufacturer producing goods and selling them to an associated full-fledged distributor for on-sale into the market. The restructuring could involve a modification to that two-party arrangement, whereby the distributor is converted to a limited risk distributor or commissionnaire, with risks previously assumed by the full-fledged distributor being assumed by the manufacturer (taking into account the guidance in Section D. 1 of Chapter I. Frequently, the restructuring will be more complicated, with functions performed, assets used and risks assumed by either or both parties to a pre-restructuring arrangement shifting to one or more members of the group ... Continue to full case
France vs. Zimmer Ltd., March 2010, Conseil D'Etat No. 304715, 308525

France vs. Zimmer Ltd., March 2010, Conseil D’Etat No. 304715, 308525

The French company, Zimmer SAS, distributed products for Zimmer Limited. In 1995 the company was converted into a commissionaire (acting in its own name but on behalf of Zimmer Ltd.). The French tax authorities argued that the commissionaire was taxable as a permanent establishment of the principal, because the commissionaire could bind the principal. The Court ruled that the commissionaire could not bind the principal. Therefore, the French commissionaire could not be a permanent establishment of the principal. Click here for English translation France-vs-Zimmer-March-2010-case-nr-304715 ... Continue to full case