Skechers US Inc. had formed a related party entity, SKII, in 1999 and transferred IP and $18 million in cash to the entity in exchange for 100 percent of the stock. Skechers then licensed the IP back from SKII and claimed a franchise tax deduction for the royalties and also deductions for management fees and interest expenses on the unpaid balance of royalty fees. The Wisconsin tax authorities held that these were sham transaction lacking business purpose and disallowed the deductions. Judgement of the Tax Appeals Commission The Tax Appeals Commission ruled in favor of the tax authorities. Excerpt “(…) The burden of proof is on Petitioner to prove that the Department’s assessment is incorrect by clear and satisfactory evidence. In this case, Petitioner must prove that it had a valid nontax business purpose for entering into the licensing transaction that generated the royalty deductions claimed on its Wisconsin tax returns and that the licensing transaction had economic substance. Both ... Read more

D. Sp. z oo had deducted interest expenses on intra-group loans and expenses related to intra-group services in its taxable income for FY 2015. The loans and services had been provided by a related party in Delaware, USA. Following a inspection, the tax authority issued an assessment where deductions for these costs had been denied resulting in additional taxable income. In regards to the interest expenses the authority held that the circumstances of the transactions indicated that they were made primarily in order to achieve a tax advantage contrary to the object and purpose of the Tax Act (reduction of the tax base by creating a tax cost in the form of interest on loans to finance the purchase of own assets), and the modus operandi of the participating entities was artificial, since under normal trading conditions economic operators, guided primarily by economic objectives and business risk assessment, do not provide financing (by loans or bonds) for the acquisition of ... 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

ResMed – a world-leading digital health company – in an October 2021 publication of results for the first quarter of FY 2022, informs that a $381.7 million tax settlement agreement has been entered with the Australian Tax Office. The dispute concerns the years 2009 through 2018, in which the ATO alleged that ResMed should have paid additional Australian taxes on income derived from the company’s Singapore operations. Excerpts from the announcement “Operating cash flow for the quarter was negative $65.7 million and was impacted by a payment to the Australian Tax Office of $284.8 million, which was the settlement amount of $381.7 million net of prior remittances.” “During the quarter, concluded the settlement agreement with the Australian Taxation Office (“ATO”), which fully resolves the transfer pricing dispute for all prior years since 2009. ResMed previously recognized a tax reserve in êscal year 2021 in anticipation of the settlement. The net impact of the settlement was $238.7 million ($381.7 million gross ... Read more

The case concerned a complex financing structure within the General Electric Group. The taxpayer, GE Financial Investments Ltd (GEFI Ltd), a UK resident company was the limited partner in a Delaware limited partnership, of which, GE Financial Investments Inc (GEFI Inc) a Delaware corporation was the general partner. GEFI Ltd filed UK company tax returns for FY 2003-2008 in which the company claimed a foreign tax credit for US federal income tax. In total, US federal income taxes amounted to $ 303 millions and exceeded the amount of tax due in the UK. The tax authorities opened an enquiry into each of GEFI’s company tax returns for the relevant period, and subsequently issued an assessment where the claims for foreign tax credits was denied in their entirety. Judgement of the Tax Tribunal The tribunal dismissed the appeal of GEFI Ltd and ruled that the UK company did not carry on business in the US. Hence GEFI Ltd was not entitled ... Read more

The Court found that section 245 (GAAR) of the Canadian Income Tax Act did not apply to the transactions in question. Subsection 245(1) defines a “tax benefit” as a reduction, avoidance or deferral of tax. The Respondent says that the tax benefit BMO received was the reduction in its tax payable as a result of subsection 112(3.1) not applying to reduce its share of the capital loss on the disposition of the common shares of NSULC. In 2005, the Bank of Montreal (“BMO”) wanted to lend a total of $1.4 billion USD to a number of its US subsidiaries referred to as the Harris Group. BMO chose to borrow those funds from third parties. Tower Structure It would not have been tax efficient for BMO to simply borrow the funds and lend them to the Harris Group. Such a structure would have resulted in BMO having to pay US withholding tax on the interest payments it received from the Harris ... Read more

An assessment was issued by the Norwegian tax authorities for years 2009 2010 and 2011 concerning the interest on a loan between Exxonmobil Production Norway Inc. (EPNI) as the lender and Exxon Mobile Delaware Holdings Inc. (EMDHI) as the borrower. Both EPNI and EMDHI are subsidiaries in the Exxon Group, where the parent company is domiciled in the United States. The loan agreement between EPNI and EMDHI was entered into in 2009. The loan had a drawing facility of NOK 20 billion. The agreed maturity was 2019, and the interest rate was fixed at 3 months NIBOR plus a margin of 30 basis points. The agreement also contained provisions on quarterly interest rate regulation and a interest adjustment clause allowing the lender to adjust the interest rate on changes in the borrower’s creditworthiness. The dispute concerns the margin of 30 basis points and the importance of the adjustment clause, also referred to as the step-up clause. The Oil Tax office ... Read more

Amazon is an online retailer that sells products through Amazon.com and related websites. Amazon also sells third-party products for which it receives a commissions. In a series of transactions  in 2005 and 2006, Amazon US transferred intangibles to Amazon Europe, a newly established European HQ placed in Luxembourg. A Cost Sharing Arrangement (“CSA”), whereby Amazon US and Amazon Europe agreed to share costs of further research, development, and marketing in proportion to the benefits A License Agreement, whereby Amazon US granted Amazon Europe the right to Amazon US’s Technology IP An Assignment Agreement, whereby Amazon US granted Amazon Europe the right to Amazon US’s Marketing IP and Customer Lists. For these transfers Amazon Europe was required to make an upfront buy-in payment and annual payments according to the cost sharing arrangement for ongoing developments of the intangibles. In the valuation, Amazon had considered the intangibles to have a lifetime of 6 to 20 years. On that basis, the buy-in payment for pre-existing ... Read more

In the Cambrix case the issue was whether the interest rate on an shareholder loan had been at arm’s length. The court concluded that the burden of proof was on the Swedish tax authorities and that sufficient evidence had not been provided to support the claim that the interest rate had not been at arm’s length. Click here for translation ... Read more

The Italian tax authorities had challenged the inter-company royalty paid by Computer Associates SPA, 30% as per contract, to it’s American parent company, registered in Delaware. According to the authorities a royalty of 7% percentage was determined to be at arm’s length and an assessment for FY 1999 was issued, where deduction of the difference in royalty payments was disallowed. The tax authorities noted the advantage for group to reduce the income of Computer Associates SPA, increasing, as a result, that of the parent company, due to the much lower taxation to which the income is subject in the US state of Delaware, where the latter operates (taxation at 36% in Italy, and 8.7% in the State of Delaware). The Supreme Court dismissed the appeal of Computer Associates SPA and concluded that the assessment was in compliance with the law. Click here for English translation Click here for other translation ... Read more