Tag: Hierarchy of methods

Germany vs X Sub GmbH, December 2016, Münster Fiscal Court, Case No 13 K 4037/13 K,F

Germany vs X Sub GmbH, December 2016, Münster Fiscal Court, Case No 13 K 4037/13 K,F

X Sub GmbH is a German subsidiary of a multinational group. The parent company Y Par B.V. and the financial hub of the group Z Fin B.V. – a sister company to the German subsidiary – are both located in the Netherlands. In its function as a financial hub, Z Fin B.V granted several loans to X Sub GmbH. As part of a tax audit, the German tax authority considered that the interest on the inter-company loans paid by X Sub GmbH to Z Fin B.V. was too high. In order to determine the arm’s length interest rate, X Sub GmbH had applied the CUP method. The tax authority instead applied the cost plus method and issued an assessment. X Sub GmbH filed an appeal to Münster Fiscal Court. The Court found that the cost plus method was justly chosen by the tax authority, as the external CUPs could not be used because of differences in conditions between the uncontrolled ... Continue to full case
Canada vs Alberta Printed Circuits Ltd., April 2011, Tax Court of Canada, Case No 2011 TCC 232

Canada vs Alberta Printed Circuits Ltd., April 2011, Tax Court of Canada, Case No 2011 TCC 232

Alberta Printed Circuits Ltd (APC, the taxpayer) was a Canadian manufacturer of custom prototype circuit boards. The manufacturing process was initially manual and later automated. In 1996, a Barbados company, APCI Inc.,  was formed via a complex ownership structure. The Barbados company provided services to Alberta Printed Circuits Ltd. by performing setup functions, software and website development, and maintenance services. APCI charged the appellant a fixed fee for the setup services and a square-inch fee for non-setup services. Alberta Printed Circuits Ltd charged the same fee for the same services to third-party customers. The tax authorities asserted that the Alberta Printed Circuits Ltd overpaid APCI $3.4 million because the terms and conditions of the agreements differed from those that would have been entered at arm’s length. Alberta Printed Circuits Ltd provided evidence of internal comparable transactions and transfer prices were determined by the comparable uncontrolled price (CUP) method. The court held that the price paid to APCI for the setup fees was arm’s length. It ... Continue to full case