In 2016 Fertilizer BV had been issued a tax assessment for FY 2012 in which the tax authorities had imposed additional taxable income of €133,076,615. In November 2019 the district court ruled predominantly in favor of the tax authorities but reduced the adjustment to €78.294.312. An appel was filed by Fertilizer BV with the Court of Appeal. Judgement of the Court of Appeal Various issues related to the assessment was disputed before the Court. Dispute 1: Allocation of debt and equity capital to a permanent establishment in Libya in connection with the application of the object exemption. More specifically, the dispute is whether the creditworthiness of the head office was correctly taken as a starting point and a sufficient adjustment was made for the increased risk profile of the permanent establishment. The Court of Appeal answered this question in the affirmative, referring to the capital allocation approach that is regarded as the preferred method for the application of Article 7 ... Read more

The following examples illustrate an important element of the definition of low value-adding intra-group services, namely, that they should not include services which are part of the MNE’s core business. Services that may seem superficially similar in nature (in the example, credit risk analysis) may or may not be low value-adding intra-group services depending on the specific context and circumstances. The examples also illustrate the point that services may not qualify as low value-adding intra group services because in their specific context they create significant risk or unique and valuable intangibles. a) Company A, situated in country A, is a shoe manufacturer and wholesale distributor of shoes in the North-West region. Its wholly-owned subsidiary B, situated in country B, is a wholesale distributor in the South-East region of the shoes manufactured by A. As part of its operations, A routinely performs a credit risk analysis on its customers on the basis of reports purchased from a credit reporting agency. A ... Read more

Lender GmbH acquired all shares in T GmbH from T in 2012 (year in dispute) for a purchase price of … €. To finance the purchase price of the shares, Lender GmbH took out a loan from its sole shareholder, D GmbH, a loan in the amount of … €, which bore interest at 8% p.a. (shareholder loan). The interest was not to be paid on an ongoing basis, but only on expiry of the loan agreement on 31.12.2021. No collateral was agreed. D GmbH, for its part, borrowed funds in the same amount and under identical terms and conditions from its shareholders, among others from its Dutch shareholder N U.A. In addition Lender GmbH received a bank loan in the amount of … €, which had an average interest rate of 4.78% p.a. and was fully secured. Finally Lender GmbH also received a vendor loan from the vendor T in the amount of … €, which bore an interest ... Read more

In 2016 Fertilizer BV had been issued a tax assessment for FY 2012 in which the tax authorities had imposed additional taxable income of €162,506,660. Fertilizer BV is the parent company of a fiscal unity for corporation tax (hereinafter: FU). It is a limited partner in a limited partnership under Dutch law, which operates a factory in [Country 1]. The interested party borrowed the money for the capital contribution to the limited partnership from a wholly-owned subsidiary. The share in profits from the limited partnership was expressed as profit from a permanent establishment. In dispute was the amount of interest attributable to the permanent establishment. The court followed the inspector in allocating – in connection with the [circumstances] in [Country 1] – 75% equity and 25% loan capital to the PE. Furthermore, the FU had deposits and loans in USD. These positions were partly hedged by forward exchange contracts. Fertilizer BV valued these deposits and loans at the historical acquisition ... Read more

The following examples illustrate an important element of the definition of low value-adding intra-group services, namely, that they should not include services which are part of the MNE’s core business. Services that may seem superficially similar in nature (in the example, credit risk analysis) may or may not be low value-adding intra-group services depending on the specific context and circumstances. The examples also illustrate the point that services may not qualify as low value-adding intra group services because in their specific context they create significant risk or unique and valuable intangibles. a) Company A, situated in country A, is a shoe manufacturer and wholesale distributor of shoes in the North-West region. Its wholly-owned subsidiary B, situated in country B, is a wholesale distributor in the South-East region of the shoes manufactured by A. As part of its operations, A routinely performs a credit risk analysis on its customers on the basis of reports purchased from a credit reporting agency. A ... Read more