Tag: Fully fledged producer

Czech Republic vs. Stora Enso Wood Products Ždírec s.r.o., August 2023, Supreme Administrative Court, No.  7 Afs 358/2021 - 34

Czech Republic vs. Stora Enso Wood Products Ždírec s.r.o., August 2023, Supreme Administrative Court, No.  7 Afs 358/2021 – 34

Stora Enso Wood Products Ždírec s.r.o. a the Czech subsidiary in the Stora Enso Group, a multinational manufacturer of packaging and building products. In the years in question, Enso Wood Products Ždírec s.r.o. provided manufacturing services to its parent company and made losses. An audit was initiated by the tax authorities focusing on the method of determining transfer prices between related parties as defined in Article 23(7) of the Income Tax Act (which contains the Czech arm’s length principle). On the basis of a functional and risk analysis (in which it examined the extent to which the applicant depended on the decision-making mechanisms of another entity in the group), the tax administration concluded that Stora Enso Wood Products Ždírec s.r.o. did not act as a fully-fledged independent entity in its production and related activities, but as a producer with a limited functional and risk profile, since its production activities were influenced by transactions and relationships with its parent company, SEWP, ... Read more
Netherlands vs "Fertilizer B.V.", March 2023, Hoge Raad - AG Conclusion, Case No 22/01909 and 22/03307 - ECLI:NL:PHR:2023:226

Netherlands vs “Fertilizer B.V.”, March 2023, Hoge Raad – AG Conclusion, Case No 22/01909 and 22/03307 – ECLI:NL:PHR:2023:226

“Fertilizer B.V.” is part of a Norwegian group that produces, sells and distributes fertiliser (products). “Fertilizer B.V.” is the parent company of a several subsidiaries, including the intermediate holding company [C] BV and the production company [D] BV. The case before the Dutch Supreme Court involves two points of dispute: (i) is a factually highly effective hedge sufficient for mandatory connected valuation of USD receivables and payables? (ii) is the transfer prices according to the supply and distribution agreements between [D] and a Swiss group company (AG) at arm’s length? (i) Factual hedge of receivables and payables “Fertilizer B.V.” had receivables, forward foreign exchange contracts and liabilities in USD at the end of 2012 and 2013. It values those receivables and payables at acquisition price or lower value in use. It recognised currency gains as soon as they were realised and currency losses as soon as a receivable was valued lower or a debt higher. The court has measured dollar ... Read more
Netherlands vs "Fertilizer BV", April 2022, Court of Appeal, Case No. ECLI:NL:GHSHE:2022:1198

Netherlands vs “Fertilizer BV”, April 2022, Court of Appeal, Case No. ECLI:NL:GHSHE:2022:1198

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
Netherlands vs "Fertilizer BV", November 2019, District Court, Case No. ECLI:NL:RBZWB:2019:4920

Netherlands vs “Fertilizer BV”, November 2019, District Court, Case No. ECLI:NL:RBZWB:2019:4920

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