Tag: Loan for acquisition of shares

Sweden vs "A Loan AB", January 2024, Supreme Administrative Court, Case No 4068-23

Sweden vs “A Loan AB”, January 2024, Supreme Administrative Court, Case No 4068-23

A AB is part of an international group. The group was planning a reorganisation involving a number of intra-group transactions. As part of this reorganisation, A AB would acquire all the shares in B from the group company C. The acquisition would mainly be financed by A AB taking a loan from group company D, which is domiciled in another EU country. The terms of the loan, including the interest rate, would be at market terms. A AB requested an advance ruling to know whether the deduction of the interest expenses on the debt to D could be denied on the grounds that the debt relationship had been incurred exclusively or almost exclusively for the purpose of obtaining a significant tax advantage or because the acquisition of B was not essentially commercially motivated. If the interest was subject to non-deductibility, A AB wanted to know whether this would constitute an unauthorised restriction of the freedom of establishment under the EC ... Read more
UK vs JTI Acquisitions Company (2011) Ltd, August 2023, Upper Tribunal, Case No [2023] UKUT 00194 (TCC)

UK vs JTI Acquisitions Company (2011) Ltd, August 2023, Upper Tribunal, Case No [2023] UKUT 00194 (TCC)

JTI Acquisitions Company Ltd was a UK holding company, part of a US group, used as an acquisition vehicle to acquire another US group. The acquisition was partly financed by intercompany borrowings at an arm’s length interest rate. The tax authorities disallowed the interest expense on the basis that the loan was taken out for a unallowable purpose. Judgement of the Upper Tribunal The Court upheld the decision and dismissed JTI Acquisitions Company Ltd’s appeal. According to the Court, a main purpose of the arrangement was to secure a tax advantage for the UK members of the group. The fact that the loans were at arm’s length was relevant but not determinative. UK vs JTI ACQUISITIONS COMPANY (2011) LIMITED ... Read more
Poland vs "D. sp. z o.o.", August 2023, Supreme Administrative Court, Case No II FSK 181/21

Poland vs “D. sp. z o.o.”, August 2023, Supreme Administrative Court, Case No II FSK 181/21

The tax authorities issued an assessment of additional taxable income for “D. sp. z o.o.” resulting in additional corporate income tax liability for 2014 in the amount of PLN 2,494,583. The basis for the assessment was the authority’s findings that the company understated its taxable income for 2014 by a total of PLN 49,732,274.05, as a result of the inclusion of deductible expenses interest in the amount of PLN 39,244,375.62, under an intra-group share purchase loan agreements paid to W. S.a.r.l. (Luxembourg) expenses for intra-group services in the amount of USD 2,957,837 (amount of PLN 10,487,898.43) paid to W. Inc. (USA) “D. sp. z o.o.” filed a complaint with the Administrative Court (WSA) requesting annulment of the assessment. In a judgment of 15 September 2020 the Administrative Court dismissed the complaint. In the opinion of the WSA, it was legitimate to adjust the terms of the loan agreement for tax purposes in such a way as to lead to transactions that ... Read more
Portugal vs "A..., Sociedade Unipessoal LDA", May 2023, Supremo Tribunal Administrativo, Case No 036/21.8BALSB

Portugal vs “A…, Sociedade Unipessoal LDA”, May 2023, Supremo Tribunal Administrativo, Case No 036/21.8BALSB

“A…, Sociedade Unipessoal LDA” had taken out two intra group loans with the purpose of acquiring 70% of the shares in a holding company within the group. The tax authorities disallowed the resulting interest expenses claiming that the loan transactions lacked a business purpose. The assessment was later upheld by the tax court in decision no. 827/2019-T. An appeal was then filed by “A…, Sociedade Unipessoal LDA” with the Supreme Administrative Court. Judgement of Supreme Administrative Court The Court dismissed the appeal and upheld the decision of the tax court and the assessment issued by the tax authorities. Experts “35. In general, a transaction is considered to have economic substance when it significantly alters the taxpayer’s economic situation beyond the tax advantage it may generate. Now, the analysis of the relevant facts leads to the conclusion that neither A… nor the financial position of the Group’s creditors knew any significant economic change, nor any other economic consequence resulted or was ... Read more
Sweden vs "A Share Loan AB", December 2022, Supreme Administrative Court, Case No 3660-22

Sweden vs “A Share Loan AB”, December 2022, Supreme Administrative Court, Case No 3660-22

As a general rule interest expenses are deductible for the purposes of income taxation of a business activity. However, for companies in a group, e.g. companies in the same group, certain restrictions on the deductibility of interest can apply. In Sweden one of these limitations is that if the debt relates to the acquisition of a participation right from another enterprise in the partnership, the deduction can only be made if the acquisition is substantially justified by business considerations, cf. Chapter 24, Sections 16-20 of the Swedish Income Tax Act. A AB is part of the international X group, which is active in the manufacturing industry. A restructuring is planned within the group which will result in A becoming the group’s Swedish parent company. As part of the restructuring, A will acquire all the shares in B AB, which is currently the parent company of the Swedish part of the group, from group company C, which is resident in another ... Read more
ATO and Singtel in Court over Intra-company Financing Arrangement

ATO and Singtel in Court over Intra-company Financing Arrangement

In 2001, Singtel, through its wholly owned Australian subsidiary, Singapore Telecom Australia Investments Pty Limited (Singtel Au), acquired the majority of the shares in Cable & Wireless Optus for $17.2 billion. The tax consequences of this acqusition was decided by the Federal Court in Cable & Wireless Australia & Pacific Holding BV (in liquiatie) v Commissioner of Taxation [2017] FCAFC 71. Cable & Wireless argued that part of the price paid under a share buy-back was not dividends and that withholding tax should therefor be refunded. The ATO and the Court disagreed. ATO and Singtel is now in a new dispute  – this time over tax consequences associated with the intra-group financing of the takeover. This case was heard in the Federal Court in August 2021. At issue is a tax assessments for FY 2011, 2012 and 2013 resulting in additional taxes in an amount $268 million. In the assessment interest deductions claimed in Australia on notes issued under a ... Read more
India vs Times Infotainment Media Ltd, August 2021, Income Tax Appellate Tribunal - Mumbai, TIA No 298/Mum/2014

India vs Times Infotainment Media Ltd, August 2021, Income Tax Appellate Tribunal – Mumbai, TIA No 298/Mum/2014

Times Infotainment Media Ltd (TIML India), is in the entertainment business, including running an FM Broadcasting channel in India. It successfully participated in the auction of the radio business of Virgin radio in March 2008 in the United Kingdom. To complete the acquisition, it acquired two SPV companies, namely TML Golden Square Limited and TIML Global Limited. TIML India wholly held TIML Global which in turn wholly held TIML Golden. TIML India received funding from its parent Bennet Coleman & Co. Limited and remitted money primarily as an interest-free loan to TIML Global on 27 June 2008. TIML Global, on behalf of TIL Golden, paid UKP 53.51 million for the acquisition of Virgin Radio Shares. The acquisition of shares in Virgin Radios by TIML Golden was completed on 30 June 2008. TIML India booked the transaction in its accounts as a loan to TIML Global Limited, but the arm’s length interest rate on the loan was claimed at zero percent ... Read more
Portugal vs "A..., Sociedade Unipessoal LDA", January 2021, Tax Court (CAAD), Case No 827/2019-T

Portugal vs “A…, Sociedade Unipessoal LDA”, January 2021, Tax Court (CAAD), Case No 827/2019-T

“A…, Sociedade Unipessoal LDA” had taken out two intra group loans with the purpose of acquiring 70% of the shares in a holding company within the group. The tax authorities disallowed the resulting interest expenses claiming that the loan transactions lacked a business purpose. A complaint was filed with the Tax Court (CAAD). Decision of the Court The Court decided in favour of the tax authorities and upheld the assessment. Click here for English translation Click here for other translation P827_2019-T - 2021-01-25 - JURISPRUDENCIA ... Read more