Tag: Losses that continue indefinitely

Italy vs Lossmaking SpA, September 2019, Lombardi Regional Tribunal, Case No 928/20/2019

Italy vs Lossmaking SpA, September 2019, Lombardi Regional Tribunal, Case No 928/20/2019

An Italian company belonging to a multinational group operating in the pharmaceutical sector, had recorded operating losses for fiscal years 1997 to 2013, while at a consolidated level the Group showed positive results. According to the Italian tax authorities, the reason why the Italian company was still in operation was due to the fact that the group had an interest in keeping an international profile and to that end the Italian company performed marketing activities benefiting the Group. Assessment was issued where the taxable income of the Italian company was added compensation for inter-company marketing services carried out by the Italian company on behalf of the group. The company argued that the pharmaceutical market and the governmental policy on the prices of medicines in Italy was the reason for the losses. In support of this claim the company submitted broad documentary evidence during the audit. The Court held in favor of the taxpayer. The company had demonstrated the reasons for ... Continue to full case
Finland vs Loss Corp, December 2017, Administrative Court, Case no 17/0979/4

Finland vs Loss Corp, December 2017, Administrative Court, Case no 17/0979/4

The Finnish tax authorities had made a transfer pricing adjustment to a Finnish marketing and sales subsidiary with continuous losses. The tax authorities had identified a “hidden” services transaction between the Finnish subsidiary and an unidentified foreign group company. The Administrative Court ruled in favor of the tax authorities. The adjustment was not considered by the Court as a recharacterisation. Reference was made to TPG 2010, paragraphs 1.34, 1.42 to 1.49, 1.64, 1.65 and 1.70 to 1.72 Click here for translation Finland vs Loss Corp 29 December 2017 Administrative Court 17-0979-4 ... Continue to full case
Czech Republic vs. Toll Manufacturer, Sep. 2016, Supreme Administrative Court, No. 5 Afs 194/2015 - 34

Czech Republic vs. Toll Manufacturer, Sep. 2016, Supreme Administrative Court, No. 5 Afs 194/2015 – 34

A Czech toll manufacturer realized losses due to low capacity utilization. Transfer pricing for the manufacturing services, had been determined by applying a cost plus method based on a budget costs without a year-end true-up. In 2008, capacity utilization was low due to market conditions and the company incurred a loss. The tax authority performed a benchmarking study using the transactional net margin method to determine the arm’s length range of net cost plus mark-ups, and issued an adjustment on that basis. The Czech manufacturing company argued that the loss was a result of market conditions and appealed the assessment. The Supreme Administrative court held that capacity utilization risk should be absorbed by the principal and not the low risk toll manufacturer. A low risk toll manufacturer may only end up in a loss position if extra costs result from its own risks – manufacturing inefficiencies. Hence, the appeal was dismissed. Click here for translation Czech vs. German Corp 2016 ... Continue to full case
India vs. L’oreal India Pvt. Ltd. May 2016, Income Tax Appellate Tribunal

India vs. L’oreal India Pvt. Ltd. May 2016, Income Tax Appellate Tribunal

L’oreal in India is engaged in manufacturing and distribution of cosmetics and beauty products. In respect of the distribution L’oreal had applied the RPM by benchmarking the gross margin of at 4o.80% against that of comparables at 14.85%. The tax administration rejected the RPM method on the basis that the L’oreal India was consistently incurring losses and the gross margins cannot be relied upon because of product differences in comparables. Accordingly, the tax administration applied Transactional Net Margin Method. L’oreal argued that the years of losses was due to a market penetration strategy in India – not non-arm’s-length pricing of transactions. The comparables had been on the Indian market much longer than L’oreal and had established themselves firmly in the Indian market. The Appellate Tribunal observed that L’oreal India buys products from its parent and sells to unrelated parties without any further processing. According to the OECD TPG, in such a situation, RPM is the most appropriate transfer pricing method. L’oreal India had also produced evidence from its parent that margin earned by the ... Continue to full case
India vs. Quark Systems Pvt. Ltd. Oct 2014, ITA No.282

India vs. Quark Systems Pvt. Ltd. Oct 2014, ITA No.282

Quark Systems Pvt. is engaged in providing customer support services on behalf of the Quark Group. TNMM had been applied as the most appropriate method for determining arm’s length income. In an audit, the tax administration rejected one of the companies selected as a comparable on the basis that it was in a start-up and had losses for consecutive years. Quark Systems argued that once functional comparability is established, the comparable should not be rejected on grounds such as start-up phase. Quark also argued for rejection of a high-margin comparable on the basis that the company had significant controlled transactions. The Appellate Tribunal upheld the need for a proper functional analysis of the tested party and the comparables in determination of ALP and objected to the selection of comparables merely on the basis of business classification provided in the database. The case was returned to the tax administration India vs Quark Systems Pvt Ltd No 1 2012 ... Continue to full case
Australia vs SNF, June 2011

Australia vs SNF, June 2011

SNF was a member of a global group with headquarters in France. SNF bought polyacrylamides from group companies overseas, and sold them to unrelated end-users in various industries in Australia. From its incorporation in 1990 until 2004, SNF consistently returned tax losses. SNF was subject to a transfer pricing audit. Determinations were made under Division 13 of Part III of the Income Tax Assessment Act 1936 to adjust the consideration for the company’s international related party transactions to reflect an arm’s length amount. For the income years from 1997 to 2003, the Commissioner made determinations under ss136AD(3) and (4) of the Act as to the arm’s length price of the chemicals. The tax authorities issued notices of assessment in 2007, and subsequently disallowed the taxpayer’s objections to those assessments. Before the Court the commissioner submitted that the taxpayer was able to continue to trade, not because of the alleged price support, but because of an injection over the period of ... Continue to full case