Tag: Inter-company loan

Poland vs "Lender S.A.", June 2013, Supreme Administrative Court, Case No II FSK 2226/11

Poland vs “Lender S.A.”, June 2013, Supreme Administrative Court, Case No II FSK 2226/11

Lender S.A had granted a loan to a related entity but had not collected the agreed interest payments and not added the interest to its taxable income. The tax authorities stated that granting an interest-bearing loan to a related entity but not collecting the interest still results in taxable revenue. The reason Lender S.A. did not collect interest on the loan was due to the group relationship. Lender S.A. filed an appeal where it argued that since the interest was not received, it could not be taxed. Judgement of the Court The Supreme Administrative Court stated that the arm’s length principle applies to agreements concluded on arm’s length terms, where these are not implemented in accordance with there wording. Hence, the arm’s length standard also applies when the parties do not follow the agreement. Click here for English translation Click here for other translation II FSK 2226_11 - Wyrok NSA z 2013-06-25 ... Read more
US vs. Sherwin-Williams Company, October 2002, Massachusetts Supreme Judicial Court, Case No 438 Mass. 71

US vs. Sherwin-Williams Company, October 2002, Massachusetts Supreme Judicial Court, Case No 438 Mass. 71

Sherwin-Williams is an Ohio corporation, headquartered in Cleveland, and is engaged in the manufacture, distribution and sale of paints and paint-related products. In 1991, it formed two subsidiaries under Delaware law to hold certain tradenames, trademarks and service marks that it had developed. Sherwin-Williams and the subsidiaries teen entered into nonexclusive licensing agreements for the right to use these various intangibles. In filing its 1991 state income tax return, Sherwin-Williams deducted all royalty and interest expenses accrued under the agreement, in computing taxable income. Following an audit, the Department of Revenue disallowed the deductions and assessed additional tax, because the transfer and license back of the marks was a “sham” disallowed under the “sham-transaction doctrine”. According to the Department of Revenue the royalty payments were not deductible, because the transactions had no valid business purpose and transactions were not at “arm’s-length.” On appeal, the Appellate Tax Board upheld the assessment of the tax authorities. Judgement for the Court The Supreme ... Read more