Tag: Double non taxation

US vs Whirlpool, May 2020, US tax court, Case No. 13986-17

US vs Whirlpool, May 2020, US tax court, Case No. 13986-17

The US tax authorities had increased Whirlpool US’s taxable because income allocated to Whirlpool Luxembourg for selling appliances was considered taxable foreign base company sales income/CFC income to the parent company in the U.S. under “the manufacturing branch rule” under US tax code Section 951(a). The income from sales of appliances had been allocated to Whirlpool Luxembourg  through a manufacturing and distribution arrangement under which it was the nominal manufacturer of household appliances made in Mexico, that were then sold to Whirlpool US and to Whirlpool Mexico. According to the arrangement the income allocated to Luxembourg was not taxable in Mexico nor in Luxembourg. Whirlpool challenged IRS’s assessment and brought the case to the US Tax Court. The tax court ruled in favor of the IRS. “If Whirlpool Luxembourg had conducted its manufacturing operations in Mexico through a separate entity, its sales income would plainly have been FCBSI [foreign base company sales income] under section 954(d)(1),”. The income should therefore be ... Continue to full case

EU report on financial crimes, tax evasion and tax avoidance

In March 2018 a special EU committee on financial crimes, tax evasion and tax avoidance (TAX3) was established. Now, one year later, The EU Parliament has approved a controversial report from the committee. According to the report close to 40 % of MNEs’ profits are shifted to tax havens globally each year with some European Union countries appearing to be the prime losers of profit shifting, as 35 % of shifted profits come from EU countries. About 80 % of the profits shifted from EU Member States are channelled to or through a few other EU Member States. The latest estimates of tax evasion within the EU point to a figure of approximately EUR 825 billion per year. Tax avoidance via six EU Member States results in a loss of EUR 42,8 billion in tax revenue in the other 22 Member States, which means that the net payment position of these countries can be offset against the losses they inflict ... Continue to full case
European Commission concludes on investigation into Luxembourg's tax treatment of McDonald's under EU state aid regulations, September 2018

European Commission concludes on investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations, September 2018

Following an investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations since 2015, the EU Commission concluded that the tax rulings granted by Luxembourg to McDonald’s in 2009 did not provide illegal state aid. According to the Commission, the law allowing McDonald’s to escape taxation on franchise income in Luxembourg – and the US – did not amount to an illegal selective advantage under EU law. The double non-taxation of McDonald’s franchise income was due to a mismatch between the laws of the United States and Luxembourg. See the 2015 announcement of formal opening of the investigations into McDonald’s tax agreements with Luxembourg from the EU Commission EU vs McDonal IP-18-5831_EN ... Continue to full case
European Commission has opened investigation into Luxembourg's tax treatment of the GDF Suez group (now Engie), September 2016

European Commission has opened investigation into Luxembourg’s tax treatment of the GDF Suez group (now Engie), September 2016

The European Commission has opened an in-depth investigation into Luxembourg’s tax treatment of the GDF Suez group (now Engie). The Commission has concerns that several tax rulings issued by Luxembourg may have given GDF Suez an unfair advantage over other companies, in breach of EU state aid rules. The Commission will assess in particular whether Luxembourg tax authorities selectively derogated from provisions of national tax law in tax rulings issued to GDF Suez. They appear to treat the same financial transaction between companies of GDF Suez in an inconsistent way, both as debt and as equity. The Commission considers at this stage that the treatment endorsed in the tax rulings resulted in tax benefits in favour of GDF Suez, which are not available to other companies subject to the same national taxation rules in Luxembourg. As from September 2008, Luxembourg issued several tax rulings concerning the tax treatment of two similar financial transactions between four companies of the GDF Suez ... Continue to full case
European Commission opens formal investigation into Luxembourg's tax treatment of McDonald's under EU state aid regulations, December 2015

European Commission opens formal investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations, December 2015

The European Commission has formally opened an investigation into Luxembourg’s tax treatment of McDonald’s. Tax ruling granted by Luxembourg may have granted McDonald’s an advantageous tax treatment in breach of EU State aid rules On the basis of two tax rulings given by the Luxembourg authorities in 2009, McDonald’s Europe Franchising has paid no corporate tax in Luxembourg since then despite recording large profits (more than €250 million in 2013). These profits are derived from royalties paid by franchisees operating restaurants in Europe and Russia for the right to use the McDonald’s brand and associated services. The company’s head office in Luxembourg is designated as responsible for the company’s strategic decision-making, but the company also has two branches, a Swiss branch, which has a limited activity related to the franchising rights, and a US branch, which does not have any real activities. The royalties received by the company are transferred internally to the US branch of the company. The Commission ... Continue to full case