26. The facts in this example are the same as in Example 8, except as follows: Under the contract between Primair and Company S, Company S is now obligated to develop and execute the marketing plan for country Y without detailed control of specific elements of the plan by Primair. Company S bears the costs and assumes certain of the risks associated with the marketing activities. The agreement between Primair and Company S does not specify the amount of marketing expenditure Company S is expected to incur, only that Company S is required to use its best efforts to market the watches. Company S receives no direct reimbursement from Primair in respect of any expenditure it incurs, nor does it receive any other indirect or implied compensation from Primair, and Company S expects to earn its reward solely from its profit from the sale of R brand watches to third party customers in the country Y market. A thorough functional ... Read more

SARL Cosi Immobilier, is a wholly owned subsidiary of the Swiss company Compagnie de Services Immobiliers SA (Cosi SA). The group is engaged in sale of properties and real estate. Following a tax audit covering the FY 2011 and 2012, an assessment of additional corporate income tax was issued, together with penalties. According to the tax authorities service fees paid by SARL Cosi to its Swiss parent (50% of the the sales commission received) for online marketing of properties and real estates located in France had not been at arm’s length. The company requested the administrative court of Lyon to discharge the assessments, but this request was rejected by the court in a judgement issued 11 December 2018. This decision was then appealed by the company to the Supreme Administrative Court. Judgement of the Supreme Administrative Court The Appeal of Cosi Immobilier was rejected by the Court. Excerpts “In the present case, the company Cosi Immobilier concluded on 17 August ... Read more

26. The facts in this example are the same as in Example 8, except as follows: Under the contract between Primair and Company S, Company S is now obligated to develop and execute the marketing plan for country Y without detailed control of specific elements of the plan by Primair. Company S bears the costs and assumes certain of the risks associated with the marketing activities. The agreement between Primair and Company S does not specify the amount of marketing expenditure Company S is expected to incur, only that Company S is required to use its best efforts to market the watches. Company S receives no direct reimbursement from Primair in respect of any expenditure it incurs, nor does it receive any other indirect or implied compensation from Primair, and Company S expects to earn its reward solely from its profit from the sale of R brand watches to third party customers in the country Y market. A thorough functional ... Read more

LG India is a wholly owned subsidiary of LG Korea, a multinational manufacturer of electronic products and electrical appliances. LG Korea and LG India entered into a technical assistance and royalty agreement in 2001 where LG India, as a licensed manufacturer, would pay a 1% royalty to LG Korea for the use of various rights for the manufacture and sale of products in India. The agreement also gave LG India a royalty-free use of the LG brand name and trademarks. The tax tribunal in 2013 held that the advertising, marketing and promotion (AMP) expenditure in excess of the arm’s length range helps to promote the brand of the foreign associated enterprise and that the Indian associated enterprise should necessarily be compensated by the foreign one. In reaching the above conclusion, the special bench applied the “bright line” test used by a US Court in DHL Corp v Commissioner. The 2014 Appeal Case The Prior 2013 Judgement from the ITA ... Read more

In the case of Roche Indonesia the tax authorities had disallowed deductions for royalties paid by the local company to F. Hoffmann-La Roche & Co. Deductions for marketing and and Promotions costs paid by the local company had also been disallowed. Judgement of the Tax Court The court decided predominantly in favour of the tax authorities. Roche Indonesia had been unable to prove the value, existence and ultimate owner of intangible assets for which the royalty was paid. In regards to the disallowed deductions of cost related to marketing and and promotions half of the costs were allowed and the other half disallowed. Click here for translation ... Read more