Due to the economic situation of automotive suppliers in Germany in 2006, “Cutting Tech GMBH” established a subsidiary (CB) in Bosnien-Herzegovina which going forward functioned as a contract manufacturer. CB did not develop the products itself, but manufactured them according to specifications provided by “Cutting Tech GMBH”. The majority of “Cutting Tech GMBH”‘s sales articles were subject to multi-stage production, which could include various combinations of production processes. In particular, “Cutting Tech GMBH” was no longer competitive in the labour-intensive manufacturing processes (cut-off grinding, turning, milling) due to the high wage level in Germany. Good contribution margins from the high-tech processes (adiabatic cutting, double face grinding) increasingly had to subsidise the losses of the labour-intensive processes. Individual production stages, however, could not be outsourced to external producers for reasons of certification and secrecy. In addition, if the production had been outsourced, there would have been a great danger that a third company would have siphoned off “Cutting Tech GMBH”‘s know-how ... Read more

In 2009 a British company – Bupa Insurance Limited – absorbed the Danish company International Health Insurance, whose shares it had acquired in 2005 and which had had a French branch since 1993. Following an audit for FY 2009 and 2010, the tax authorities considered that the French branch had passed on to Bupa Insurance Limited, free of charge, the customers associated with its insurance business in France, and considered this transaction to be an indirect transfer of profits within the meaning of Article 57 of the General Tax Code. The Administrative Court of Appeal set aside the assessment and an appeal was then filed with the Conseil d’État by the tax authorities. Judgement of the Supreme Administrative Court The Supreme Administrative Court upheld the decision from the CAA and dismissed the appeal of the tax authorities. Excerpts “3. It is clear from the statements in the judgment under appeal that the Marseille Administrative Court of Appeal held that the ... Read more

A restructuring that followed the acquisition of Timberland by VF Enterprises in 2011 resulted in an intra-group transfer of ownership to valuable intangibles to a Swiss corporation, TBL Investment Holdings. The IRS was of the opinion that gains from the transfer was taxable. Judgement of the US Tax Court The tax court upheld the assessment of the tax authorities. Excerpt: “we have concluded that petitioner’s constructive distribution to VF Enterprises of the TBL GmbH stock that petitioner constructively received in exchange for its intangible property was a “disposition” within the meaning of section 367(d)(2)(A)(ii)(II). We also conclude, for the reasons explained in this part IV, that no provision of the regulations allows petitioner to avoid the recognition of gain under that statutory provision.” “Because we do not “agree[] to reduce the adjustment to income for the trademarks based on a 20-year useful life limitation, pursuant to Temp. Treas. Reg. § 1.367(d)-1T,” we determine, in accordance with the parties’ stipulation, that ... Read more

Due to the economic situation of automotive suppliers in Germany in 2006, “Cutting Tech GMBH” established a subsidiary (CB) in Bosnien-Herzegovina which going forward functioned as a contract manufacturer. CB did not develop the products itself, but manufactured them according to specifications provided by “Cutting Tech GMBH”. The majority of “Cutting Tech GMBH”‘s sales articles were subject to multi-stage production, which could include various combinations of production processes. In particular, “Cutting Tech GMBH” was no longer competitive in the labour-intensive manufacturing processes (cut-off grinding, turning, milling) due to the high wage level in Germany. Good contribution margins from the high-tech processes (adiabatic cutting, double face grinding) increasingly had to subsidise the losses of the labour-intensive processes. Individual production stages, however, could not be outsourced to external producers for reasons of certification and secrecy. In addition, if the production had been outsourced, there would have been a great danger that a third company would have siphoned off “Cutting Tech GMBH”‘s know-how ... Read more