Tag: Management of functions

TPG2022 Chapter VI paragraph 6.59

Group members that use assets in the development, enhancement, maintenance, protection, and exploitation of an intangible should receive appropriate compensation for doing so. Such assets may include, without limitation, intangibles used in research, development or marketing (e.g. know-how, customer relationships, etc.), physical assets, or funding. One member of an MNE group may fund some or all of the development, enhancement, maintenance, and protection of an intangible, while one or more other members perform all of the relevant functions. When assessing the appropriate anticipated return to funding in such circumstances, it should be recognised that in arm’s length transactions, a party that provides funding, but does not control the risks or perform other functions associated with the funded activity or asset, generally does not receive anticipated returns equivalent to those received by an otherwise similarly-situated investor who also performs and controls important functions and controls important risks associated with the funded activity. The nature and amount of compensation attributable to an ... Read more
Switzerland vs "Trust Administrator A. SA", September 2019, Federal Supreme Court, Case No 2C_343/2019

Switzerland vs “Trust Administrator A. SA”, September 2019, Federal Supreme Court, Case No 2C_343/2019

A Swiss company provided administration and other services to trusts. According to the company a related party in the Seychelles handled the daily business and received remuneration in accordance with an intra-group service agreement. Due to the service fees paid the Swiss company reported losses. Following an audit the tax administration issued an assessment where the fees paid to the related company in the Seychelles had been determined using the cost plus (5%) method. Judgement of the Supreme Court The court dismissed the appeal of A. SA and upheld the assessment of the tax authorities. The Court confirmed that the Seychelles company only performed routine functions without assumption of any significant risk. The cost plus 5% remuneration was therefore confirmed. Excerpts “4.6. According to the OECD Committee on Fiscal Affairs, by referring to the conditions that would prevail between independent enterprises for comparable transactions (i.e. for “comparable open market transactions”) in making the profit adjustment, the arm’s length principle takes ... Read more

TPG2017 Chapter VI paragraph 6.59

Group members that use assets in the development, enhancement, maintenance, protection, and exploitation of an intangible should receive appropriate compensation for doing so. Such assets may include, without limitation, intangibles used in research, development or marketing (e.g. know-how, customer relationships, etc.), physical assets, or funding. One member of an MNE group may fund some or all of the development, enhancement, maintenance, and protection of an intangible, while one or more other members perform all of the relevant functions. When assessing the appropriate anticipated return to funding in such circumstances, it should be recognised that in arm’s length transactions, a party that provides funding, but does not control the risks or perform other functions associated with the funded activity or asset, generally does not receive anticipated returns equivalent to those received by an otherwise similarly-situated investor who also performs and controls important functions and controls important risks associated with the funded activity. The nature and amount of compensation attributable to an ... Read more