Tag: Luxembourg

European Commission decision to open state-aid investigation into Luxembourg deduction of deemed interest on interest free loans - The Huhtamaki

European Commission decision to open state-aid investigation into Luxembourg deduction of deemed interest on interest free loans – The Huhtamaki

The European Commission has published a non-confidential version of the decision to open a state aid investigation into tax rulings granted by the Luxembourg tax authorities to the Huhtamaki Group in relation to the treatment of interest-free loans granted by an Irish group company to a Luxembourg group company, Huhtalux S.a.r.l. The investigation will focus on three rulings obtained by a Luxembourg subsidiary of a group from the Luxembourg tax administration in 2009, 2012 and 2013. The Luxembourg subsidiary which carried out intra-group financing activities was granted interest-free loans from an Irish group subsidiary and used the funds to grant interest bearing loans to other group companies. In the rulings the tax authorities in Luxembourg confirmes that the financing subsidiary can deduct an amount of deemed interest on the interest-free loans corresponding to interest payments that an independent third party would have demanded for the loans in question. As in the “Belgian excess profits” State aid case, the Commission considers that ... Continue to full case
Austria vs. LU Ltd, 27. march 2019, VwGH, Case No Ro 2018713/0004

Austria vs. LU Ltd, 27. march 2019, VwGH, Case No Ro 2018713/0004

A Luxembourg-based limited company (LU) held a 30% stake in an Austrian stock company operating an airport. LU employed no personnel and did not develop any activities. The parent company of LUP was likewise resident in Luxembourg. LUP had business premises in Luxembourg and employed three people. All of the shares in LUP were held by a company in the British Cayman Islands in trust for a non- resident Cayman Islands-based fund. In 2015, the Austrian Company distributed a dividend to LU. LU was not yet involved in the Austrian corporation “for an uninterrupted period of at least one year” thus withholding tax was withheld and deducted. A request for refunding of the withholding tax was denied by the tax office because the dividend was distributed to recipients in a third country and the tax authorities regarded the structure as abusive. LU then appealed the decision to the Federal Fiscal Court. The Court held that the appeal was unfounded, because ... Continue to full case

EU report on financial crimes, tax evasion and tax avoidance

In March 2018 a special EU committee on financial crimes, tax evasion and tax avoidance (TAX3) was established. Now, one year later, The EU Parliament has approved a controversial report from the committee. According to the report close to 40 % of MNEs’ profits are shifted to tax havens globally each year with some European Union countries appearing to be the prime losers of profit shifting, as 35 % of shifted profits come from EU countries. About 80 % of the profits shifted from EU Member States are channelled to or through a few other EU Member States. The latest estimates of tax evasion within the EU point to a figure of approximately EUR 825 billion per year. Tax avoidance via six EU Member States results in a loss of EUR 42,8 billion in tax revenue in the other 22 Member States, which means that the net payment position of these countries can be offset against the losses they inflict ... Continue to full case
Commission opens in-depth investigation into tax treatment of Huhtamäki in Luxembourg

Commission opens in-depth investigation into tax treatment of Huhtamäki in Luxembourg

The European Commission has now opened an in-depth investigation to examine whether tax rulings granted by Luxembourg to Finnish food and drink packaging company Huhtamäki may have given the company an unfair advantage over its competitors, in breach of EU State Aid rules. Margrethe Vestager, Commissioner in charge of competition policy, said: “Member States should not allow companies to set up arrangements that unduly reduce their taxable profits and give them an unfair advantage over their competitors. The Commission will carefully investigate Huhtamäki’s tax treatment in Luxembourg to assess whether it is in line with EU State aid rules.” The Commission’s formal investigation concerns three tax rulings issued by Luxembourg to the Luxembourg-based company Huhtalux S.à.r.l. in 2009, 2012 and 2013. The 2009 tax ruling was disclosed as part of the “Luxleaks” investigation led by the International Consortium of Investigative Journalists in 2014. Huhtalux is part of the Huhtamäki group, which is headquartered in Finland. Huhtamäki is a company active ... Continue to full case
Denmark vs T and Y Denmark, February 2019, European Court of Justice, Cases C-116/16 and C-117/16

Denmark vs T and Y Denmark, February 2019, European Court of Justice, Cases C-116/16 and C-117/16

The cases of T Danmark (C-116/16) and Y Denmark Aps (C-117/16) adresses questions related to interpretation of the EU-Parent-Subsidary-Directive The issue is withholding taxes levied by the Danish tax authorities in situations where dividend payments are made to conduit companies located in treaty countries but were the beneficial owners of these payments are located in non-treaty countries. During the proceedings in the Danish court system the European Court of Justice was asked a number of questions related to the conditions under which exemption from withholding tax can be denied on dividend payments to related parties. The European Court of Justice has now answered these questions in favor of the Danish Tax Ministry; Benefits granted under the Parent-Subsidiary Directive can be denied where fraudulent or abusive tax avoidance is involved. Quotations from cases C-116/16 and C-117/16: “The general principle of EU law that EU law cannot be relied on for abusive or fraudulent ends must be interpreted as meaning that, where ... Continue to full case
Denmark vs N, X, C, and Z Denmark, February 2019, European Court of Justice, Cases C-115/16, C-118/16, C-119/16 and C-299/16

Denmark vs N, X, C, and Z Denmark, February 2019, European Court of Justice, Cases C-115/16, C-118/16, C-119/16 and C-299/16

The cases of N Luxembourg 1 (C-115/16), X Denmark A/S (C-118/16), C Danmark I (C-119/16) and Z Denmark ApS (C-299/16), adresses questions related to the interpretation of the EU Interest and Royalty Directive. The issue in these cases is withholding taxes levied by the Danish tax authorities in situations where interest payments are made to conduit companies located in treaty countries but were the beneficial owners of these payments are located in non-treaty countries. During the proceedings in the Danish court system the European Court of Justice was asked a number of questions related to the conditions under which exemption from withholding tax can be denied on interest payments to related parties. The European Court of Justice has now answered these questions in favor of the Danish Tax Ministry; Benefits granted under the Interest and Royalty Directive can be denied where fraudulent or abusive tax avoidance is involved. Quotations from cases C-115/16, C-118/16, C-119/16 and C-299/16: “The concept of ‘beneficial ... Continue to full case
Italy vs Dolce & Gabbana, December 2018, Supreme Court, Case no 33234/2018

Italy vs Dolce & Gabbana, December 2018, Supreme Court, Case no 33234/2018

In this case the Italian fashion group, Dolce & Gabbana, had moved ownership of valuable intangibles to a subsidiary established for that purpose in Luxembourg. The Italian Revenue Agency found the arrangement to be wholly artificial and set up only to avoid Italien taxes and to benefit from the privileged tax treatment in Luxembourg. The Revenue Agency argued that all decision related to the intangibles was in fact taken at the Italian headquarters of Dolce & Gabbana in Milan, and not in Luxembourg, where there were no administrative structure and only one employee with mere secretarial duties. Dolce & Gobbana disargeed with these findings and brought the case to court. In the first and second instance the courts ruled in favor of the Italian Revenue Agency, but the Italian Supreme Court ruled in favor of Dolce & Gabbana. According to the Supreme Court, the fact that a company is established in another EU Member State to benefit from more advantageous ... Continue to full case
European Commission vs McDonald, December 2018, European Commission Case no. SA.38945

European Commission vs McDonald, December 2018, European Commission Case no. SA.38945

The European Commission found that Luxembourg did not grant illegal State aid to McDonald’s as a consequence of the exemption of income attributed to a US branch. ...it is not established that the Luxembourg tax authorities misapplied the Luxembourg – US double taxation treaty. Therefore, on the basis of the doubts raised in the Opening Decision and taking into account its definition of the reference system, the Commission cannot establish that the contested rulings granted a selective advantage to McD Europe by misapplying the Luxembourg – US double taxation treaty ... Continue to full case
Italy vs CDC srl, December 2018, Italian Supreme Court, Case No 32255/2018

Italy vs CDC srl, December 2018, Italian Supreme Court, Case No 32255/2018

A refund of withholding tax on dividend payments from an Italien subsidiary, CDC srl, was claimed by the parent company in Luxembourg, CDC Net SA. The parent company had been subject to income tax in Luxembourg as required by the EU Directive, but in Luxembourg there were no actual taxation of the dividends. The refund was denied as, according to the authorities, the Luxembourg company did not meet the requirements of the EU Directive due to lack of actual taxation of the dividends in Luxembourg. The Supreme Court ruled in favor of the tax authorities and denied the refund of withholding taxes under the European Parent Subsidiary Directive (Directive 90/435/EEC, Article 5, paragraph 1, ) as no double taxation existed due to the dividend exemption regime in Luxembourg. Click here for translation Italy Dividend Supreme Court 2018 ... Continue to full case
Norway vs Stanley Black & Decker Norway AS , December 2018, Borgarting Lagmannsrett, Case No 2016-105694

Norway vs Stanley Black & Decker Norway AS , December 2018, Borgarting Lagmannsrett, Case No 2016-105694

At issue was the transfer pricing method applied on transactions between Black & Deckers Norwegian distribution company and the group trading hub in Luxembourg, Black & Decker Ltd SARL. The Norwegian tax authorities in 2013 issued a tax assessment of Black and Decker Norway AS where the taxable income for years 2005 – 2008 was increased with a total amount of NOK 50 million. The assessment was appealed to the Tax Appeals Committee where the amount was reduced to a total of NOK 26 million in line with recommendations of the tax authorities during the proceedings. The decision of the Tax Appeals Committee was upheld by the District Court and later the Court of Appeal where the appeal of Black & Decker was rejected. Click here for translation Norway vs Black & Decker december 2018 case no LB-2016-105694 ... Continue to full case
Canada vs ALTA Energy Luxemburg, September 2018, Case no 2014-4359(IT)G

Canada vs ALTA Energy Luxemburg, September 2018, Case no 2014-4359(IT)G

ALTA Energy, a resident of Luxembourg, claimed an exemption from Canadian income tax under Article 13(5) of the Canada-Luxembourg Income Tax Treaty in respect of a large capital gain arising from the sale of shares of ALTA Canada, its wholly-owned Canadian subsidiary. At that time, Alta Canada carried on an unconventional shale oil business in the Duvernay shale oil formation situated in Northern Alberta. Alta Canada was granted the right to explore, drill and extract hydrocarbons from an area of the Duvernay formation designated under licenses granted by the government of Alberta. The Canadian tax authorities denied that the exemption applied and assessed ALTA Energy accordingly. Article 13(5) of the Canada-Luxembourg Tax Treaty is a distributive rule of last application. It applies only in the case where the capital gain is not otherwise taxable under paragraphs (1) to (4) of Article 13 of the Treaty. Article 13(4) is relevant to the outcome of this appeal. Under that provision, Canada has ... Continue to full case
European Commission concludes on investigation into Luxembourg's tax treatment of McDonald's under EU state aid regulations, September 2018

European Commission concludes on investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations, September 2018

Following an investigation into Luxembourg’s tax treatment of McDonald’s under EU state aid regulations since 2015, the EU Commission concluded that the tax rulings granted by Luxembourg to McDonald’s in 2009 did not provide illegal state aid. According to the Commission, the law allowing McDonald’s to escape taxation on franchise income in Luxembourg – and the US – did not amount to an illegal selective advantage under EU law. The double non-taxation of McDonald’s franchise income was due to a mismatch between the laws of the United States and Luxembourg. See the 2015 announcement of formal opening of the investigations into McDonald’s tax agreements with Luxembourg from the EU Commission EU vs McDonal IP-18-5831_EN ... Continue to full case
European Commission's investigations into member state transfer pricing and tax ruling practices

European Commission’s investigations into member state transfer pricing and tax ruling practices

Since June 2013, the European Commission has been investigating tax ruling practices of EU Member States. A Task Force was set up in summer 2013 to follow up on allegations of favourable tax treatment of certain companies, in particular in the form of unilateral tax rulings. The Treaty on the Functioning of the European Union (“TFEU”) provides that “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”. The State aid rules ensures that the functioning of the internal market is not distorted by anticompetitive behavior favouring some to the detriment of others. In June 2014 the Commission initiated a series of State aid investigations on Multinational Corporations related to transfer pricing practices and rulings. Final decisions now have been published ... Continue to full case
Amazon has settled a 200 million Euro tax dispute with France

Amazon has settled a 200 million Euro tax dispute with France

The dispute between Amazon and the French tax authorities relates to transfer pricing in fiscal years 2006 to 2010. Amazon has been accused of tax avoidance in the EU by channeling all local sales through Luxembourg. This set up has been changed in France, where Amazon in 2015 established a branch where all retail sales, charges and profits in France are booked. In October 2017 the EU commission decided that Luxembourg’s arrangement with Amazon is in conflict with EU State Aid regulations and ordered Luxembourg to recover 250 million euros in back taxes from Amazon. This decision has later been challenged by Luxembourg ... Continue to full case

South Africa vs. Kumba Iron Ore, 2017, Settlement 2.5bn

A transfer pricing dispute between South African Revenue Service and Sishen Iron Ore, a subsidiary of Kumba Iron Ore, has now been resolved in a settlement of ZAR 2.5bn. The case concerned disallowance of sales commissions paid to offshore sales and marketing subsidiaries in Amsterdam, Luxembourg and Hong Kong. Since 2012, Kumba Iron Ore’s international marketing has been integrated with the larger Anglo American group’s Singapore-based marketing hub. The settlement follows a similar investigations into the transfer pricing activities of Evraz Highveld Steel, which resulted in a R685 million tax claim against the now-bankrupt company related to apparent tax evasion using an Austrian shell company between 2007 and 2009 ... Continue to full case
European Commission vs. Amazon and Luxembourg, October 2017, State Aid - Comissions decision, SA.38944 

European Commission vs. Amazon and Luxembourg, October 2017, State Aid – Comissions decision, SA.38944 

Luxembourg gave illegal tax benefits to Amazon worth around €250 million The European Commission has concluded that Luxembourg granted undue tax benefits to Amazon of around €250 million.  Following an in-depth investigation launched in October 2014, the Commission has concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in Luxembourg without any valid justification. The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies). In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU’s taxable profits. The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the Commission ... Continue to full case
Uncovering Low Tax Jurisdictions and Conduit Jurisdictions

Uncovering Low Tax Jurisdictions and Conduit Jurisdictions

By Javier Garcia-Bernardo, Jan Fichtner, Frank W. Takes, & Eelke M. Heemskerk Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identifcation of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate ... Continue to full case
US vs. Amazon, March 2017, US Tax Court, Case No. 148 T.C. No 8

US vs. Amazon, March 2017, US Tax Court, Case No. 148 T.C. No 8

Amazon is an online retailer that sells products through Amazon.com and related websites. Amazon also sells third-party products for which it receives a commissions. In a series of transactions  in 2005 and 2006, Amazon US transferred intangibles to Amazon Europe, a newly established European HQ placed in Luxembourg. A Cost Sharing Arrangement (“CSA”), whereby Amazon US and Amazon Europe agreed to share costs of further research, development, and marketing in proportion to the benefits A License Agreement, whereby Amazon US granted Amazon Europe the right to Amazon US’s Technology IP An Assignment Agreement, whereby Amazon US granted Amazon Europe the right to Amazon US’s Marketing IP and Customer Lists. For these transfers Amazon Europe was required to make an upfront buy-in payment and annual payments according to the cost sharing arrangement for ongoing developments of the intangibles. In the valuation, Amazon had considered the intangibles to have a lifetime of 6 to 20 years. On that basis, the buy-in payment for pre-existing ... Continue to full case
Oxfam's list of Tax Havens, December 2016

Oxfam’s list of Tax Havens, December 2016

Oxfam’s list of Tax Havens, in order of significance are: (1) Bermuda (2) the Cayman Islands (3) the Netherlands (4) Switzerland (5) Singapore (6) Ireland (7) Luxembourg (8) Curaçao (9) Hong Kong (10) Cyprus (11) Bahamas (12) Jersey (13) Barbados, (14) Mauritius and (15) the British Virgin Islands. Most notably is The Netherlands placement as no. 3 on the list. Oxfam researchers compiled the list by assessing the extent to which countries employ the most damaging tax policies, such as zero corporate tax rates, the provision of unfair and unproductive tax incentives, and a lack of cooperation with international processes against tax avoidance (including measures to increase financial transparency). Many of the countries on the list have been implicated in tax scandals. For example Ireland hit the headlines over a tax deal with Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate in the country. And the British Virgin Islands is home to more ... Continue to full case
European Commission has opened investigation into Luxembourg's tax treatment of the GDF Suez group (now Engie), September 2016

European Commission has opened investigation into Luxembourg’s tax treatment of the GDF Suez group (now Engie), September 2016

The European Commission has opened an in-depth investigation into Luxembourg’s tax treatment of the GDF Suez group (now Engie). The Commission has concerns that several tax rulings issued by Luxembourg may have given GDF Suez an unfair advantage over other companies, in breach of EU state aid rules. The Commission will assess in particular whether Luxembourg tax authorities selectively derogated from provisions of national tax law in tax rulings issued to GDF Suez. They appear to treat the same financial transaction between companies of GDF Suez in an inconsistent way, both as debt and as equity. The Commission considers at this stage that the treatment endorsed in the tax rulings resulted in tax benefits in favour of GDF Suez, which are not available to other companies subject to the same national taxation rules in Luxembourg. As from September 2008, Luxembourg issued several tax rulings concerning the tax treatment of two similar financial transactions between four companies of the GDF Suez ... Continue to full case