In 2009 the English company EDF Energy UK Ltd (EDFE), a wholly-owned subsidiary of SAS Electricité de France International (SAS EDFI), issued 66,285 bonds convertible into shares (OCAs) for a unit nominal value of EUR 50,000. SAS EDFI subscribed to all of these OCAs for their nominal value, i.e. a total subscription price of EUR 3,314,250,000. The OCAs had a maturity of five years, i.e. until October 16, 2014, and could be converted into new EDFE shares at the instigation of the subscriber at any time after a three-year lock-up period, i.e. from October 16, 2012. Each bond entitled the holder to receive 36,576 EDFE shares after conversion. The annual coupon for the OCAs was set at 1.085%. In this respect, SAS EDFI determined, on the basis of a panel of bond issues of independent comparables, the arm’s length rate that should be applied to conventional bonds, i.e. 4.41% (mid-swap rate and premium of 1.70%), 490 million according to the ... Read more

Frucor Suntory (FHNZ) had deducted purported interest expenses that had arisen in the context of a tax scheme involving, among other steps, its issue of a Convertible Note to Deutsche Bank, New Zealand Branch (DBNZ), and a forward purchase of the shares DBNZ could call for under the Note by FHNZ’s Singapore based parent Danone Asia Pte Ltd (DAP). The Convertible Note had a face value of $204,421,565 and carried interest at a rate of 6.5 per cent per annum. Over its five-year life, FHNZ paid DBNZ approximately $66 million which FHNZ characterised as interest and deducted for income tax purposes. The tax authorities issued an assessment where deductions of interest expenses in the amount of $10,827,606 and $11,665,323 were disallowed in FY 2006 and 2007 under New Zealand´s general anti-avoidance rule in s BG 1 of the Income Tax Act 2004. In addition, penalties of $1,786,555 and $1,924,779 for those years were imposed. The tax authorities found that, although ... Read more

In 2009 the English company EDF Energy UK Ltd (EDFE), a wholly-owned subsidiary of SAS Electricité de France International (SAS EDFI), issued 66,285 bonds convertible into shares (OCAs) for a unit nominal value of EUR 50,000. SAS EDFI subscribed to all of these OCAs for their nominal value, i.e. a total subscription price of EUR 3,314,250,000. The OCAs had a maturity of five years, i.e. until October 16, 2014, and could be converted into new EDFE shares at the instigation of the subscriber at any time after a three-year lock-up period, i.e. from October 16, 2012. Each bond entitled the holder to receive 36,576 EDFE shares after conversion. The annual coupon for the OCAs was set at 1.085%. In this respect, SAS EDFI determined, on the basis of a panel of bond issues of independent comparables, the arm’s length rate that should be applied to conventional bonds, i.e. 4.41% (mid-swap rate and premium of 1.70%), 490 million according to the ... Read more

Sté Paule Ka Holding, was set up as part of a leveraged buy-out (LBO) operation to finance the acquisition of the Paule Ka group, and in 2011 it acquired the entire capital of the group a price of 42 million euros. The acquisition was financed by issuing convertible bonds carrying an interest rate of 8%. The French tax authorities issued an assessment where deductions for certain payments related to the acquisition and part of the interest payments on the bonds were disallowed. Decision from the Administrative court of appeal The Court found in favor of the company in regards to the payment related to the acquisition and in favor of the tax administration in regards to the partially disallowed deduction of interest payments. “It follows from the foregoing that the elements invoked by the administration do not provide proof that the expenditure of EUR 390,227 correctly entered in the accounts was not incurred in the interest of the company Paule Ka Holding. The ... Read more

Frucor Suntory (FHNZ) had deducted purported interest expenses that had arisen in the context of a tax scheme involving, among other steps, its issue of a Convertible Note to Deutsche Bank, New Zealand Branch (DBNZ), and a forward purchase of the shares DBNZ could call for under the Note by FHNZ’s Singapore based parent Danone Asia Pte Ltd (DAP). The Convertible Note had a face value of $204,421,565 and carried interest at a rate of 6.5 per cent per annum. Over its five-year life, FHNZ paid DBNZ approximately $66 million which FHNZ characterised as interest and deducted for income tax purposes. The tax authorities issued an assessment where deductions of interest expenses in the amount of $10,827,606 and $11,665,323 were disallowed in FY 2006 and 2007 under New Zealand´s general anti-avoidance rule in s BG 1 of the Income Tax Act 2004. In addition, penalties of $1,786,555 and $1,924,779 for those years were imposed. The tax authorities found that, although ... Read more

This case concerns application of the general anti-avoidance rule in s BG 1 of the Income Tax Act 2004. The tax authorities issued an assessment where deductions of $10,827,606 and $11,665,323 were disallowed in the 2006 and 2007 income tax years respectively. In addition, penalties of $1,786,555 and $1,924,779 for those years were imposed. The claimed deductions arose in the context of an arrangement entered into by Frucor Holdings Ltd (FHNZ) involving, among other steps, its issue of a Convertible Note to Deutsche Bank, New Zealand Branch (DBNZ) and a forward purchase of the shares DBNZ could call for under the Note by FHNZ’s Singapore based parent Danone Asia Pte Ltd (DAP). The Note had a face value of $204,421,5654 and carried interest at a rate of 6.5 per cent per annum. Over its five-year life, FHNZ paid DBNZ approximately $66 million which FHNZ characterised as interest and deducted for income tax purposes. The tax authorities said that, although such ... Read more