Tag: Netherlands

Fiat Chrysler reaches a EUR 2.5 billion settelment with the Italien tax authorities

Fiat Chrysler reaches a EUR 2.5 billion settelment with the Italien tax authorities

Fiat Chrysler has reached a settlement with the Italian tax agency over taxable gains related to a transfer of the U.S. Chrysler business from Fiat SpA Italy to Fiat Chrysler Automobiles NV (Netherlands). The Italian tax agency claimed that the value of the U.S. Chrysler business had been underestimated and issued a preliminary assessment with an additional taxable gain of 5.1 billion euros. The agency had valued Chrysler at 12.5 billion euros, while Fiat SpA had declared it to be worth less than 7.5 billion. Under the terms of the latter settlement the additional taxable gain has agreed at 2.5 billion euros ... Continue to full case
Google - Taxes and Transfer Pricing

Google – Taxes and Transfer Pricing

Google’s tax affairs are back in the spotlight after filings in the Netherlands have showed that billions of dollars were moved to Bermuda in 2016 using the “double Irish Dutch sandwich”. According to the Washington Post, Google’s cash transfers to Bermuda reached $27b in 2016. Google uses the double Irish Dutch sandwich structure to shield the majority of it’s international profits from taxation. The setup involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda-mailbox owned by another company registered in Ireland. US According to US filings, Google’s global effective tax rate in 2016 was 19.3%. New US tax law will give companies such as Google an incentive to repatriate much of that cash by offering them a “one-time”, 15.5% tax rate on offshore funds. After that, foreign earnings will be taxed at 10.5%, with companies allowed to deduct foreign tax liabilities from this amount. The law will also impose ... Continue to full case
Microsoft - Taxes and Transfer Pricing

Microsoft – Taxes and Transfer Pricing

Microsoft’s tax affairs have been in the spotlight of tax authorities all over the World during the last decade. Why? The setup used by Microsoft involves shifting profits from sales in the US, Europe and Asia to regional operating centers placed in low tax jurisdictions (Bermuda, Luxembourg, Ireland, Singapore and Puerto Rico). The following text has been provided by Microsoft in a US filing concerning effective tax and global allocation of income: “Our effective tax rate for the three months ended September 30, 2017 and 2016 was 18% and 17%, respectively. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico.“ “In fiscal year 2017, our U.S. income before income taxes was $6.8 billion and our foreign income before income taxes was $23.1 billion. In fiscal year 2016, ... Continue to full case
European Commission vs. The Netherlands and Starbucks, September 2019, General Court of the European Union, Case No. T-760/15

European Commission vs. The Netherlands and Starbucks, September 2019, General Court of the European Union, Case No. T-760/15

In 2008, the Netherlands tax authorities concluded an advance pricing arrangement (APA) with Starbucks Manufacturing EMEA BV (Starbucks BV), part of the Starbucks group, which, inter alia, roasts coffees. The objective of that arrangement was to determine Starbucks BV’s remuneration for its production and distribution activities within the group. Thereafter, Starbucks BV’s remuneration served to determine annually its taxable profit on the basis of Netherlands corporate income tax. In addition, the APA endorsed the amount of the royalty paid by Starbucks BV to Alki, another entity of the same group, for the use of Starbucks’ roasting IP. More specifically, the APA provided that the amount of the royalty to be paid to Alki corresponded to Starbucks BV’s residual profit. The amount was determined by deducting Starbucks BV’s remuneration, calculated in accordance with the APA, from Starbucks BV’s operating profit. In 2015, the Commission found that the APA constituted aid incompatible with the internal market and ordered the recovery of that ... Continue to full case
Italy vs Agusta Holding BV, May 2019, Supreme Court, Case No 14527/2019

Italy vs Agusta Holding BV, May 2019, Supreme Court, Case No 14527/2019

A Dutch company, Agusta Holding BV, submitted a request regarding the reimbursement of withholding tax paid in Italy by its Italian subsidiary on dividends distributed for the fiscal year 2001. The request was initially accepted and the withholding tax paid back. But after an audit, the reimbursement was then challenged. The tax authorities found that Agusta Holding BV had been incorporated in the Netherlands only to benefit from the favourable fiscal dividend regime provided by the Italian-Netherland double tax treaty and from the Dutch tax regime concerning the exemption of dividends from taxable income. Agusta Holding BV appealed the decision of the tax office before the Provincial Tax Court which ruled in favor of Augusta Holding BV as the deadline to ask for the reimbursement of the withholding tax back had expired at the time of the audit conducted by local tax office. The local tax office appealed this decision before the Regional Tax Court. The Regional Tax Court overturned ... 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
The European Commission opens in-depth investigation into tax treatment of Nike and Converse in the Netherlands

The European Commission opens in-depth investigation into tax treatment of Nike and Converse in the Netherlands

The European Commission has opened an in-depth investigation to examine whether tax rulings granted by the Netherlands to Nike 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 complex structures that unduly reduce their taxable profits and give them an unfair advantage over competitors. The Commission will investigate carefully the tax treatment of Nike in the Netherlands, to assess whether it is in line with EU State aid rules. At the same time, I welcome the actions taken by the Netherlands to reform their corporate taxation rules and to help ensure that companies will operate on a level playing field in the EU.” Nike is a US based company involved worldwide in the design, marketing and manufacturing of footwear, clothing, equipment and accessories, in particular in the sports area. The formal investigation concerns ... Continue to full case
Pharma and Tax Avoidance, Report from Oxfam

Pharma and Tax Avoidance, Report from Oxfam

New Oxfam research shows that four pharmaceutical corporations — Abbott, Johnson & Johnson, Merck, and Pfizer — systematically allocate super profits in overseas tax havens. In eight advanced economies, pharmaceutical profits averaged 7 percent, while in seven developing countries they averaged 5 percent. In comparison, profits margins averaged 31 percent in countries with low or no corporate tax rates – Belgium, Ireland, Netherlands and Singapore. The report exposes how pharmaceutical corporations uses sophisticated tax planning to avoid taxes. cr-prescription-for-poverty-pharma-180918-en ... Continue to full case
France vs Philips, September 2018, Conseil d’État, Case No 405779

France vs Philips, September 2018, Conseil d’État, Case No 405779

Philips France SAS provides contract R&D to it’s Dutch parent. Compensation for the service was calculated as cost plus 10%. In the years 2003 to 2007 Philips France received government subsidies for performing R&D. These subsidies had been deducted by the company from the cost base before calculating of the cost plus remuneration. The French tax authorities issued a tax assessment where the deduction was denied and the remuneration calculated on the full cost base. The Supreme Administrative Court ruled that a deduction of subsidies from the cost base does not constitute a “transfer of profits abroad” and allowed the reduced cost base for calculation of the arm’s length remuneration.  Click here for translation CÉt_8ème_-_3ème_chambres_réunies_19_09_2018_405779 ... 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
Apple - Taxes and Transfer Pricing

Apple – Taxes and Transfer Pricing

Apple’s tax affairs have been in the spotlight of tax authorities for decades – and still are! Settlements have been entered with numerous European Countries, among others – Italy, the UK and France. Apple has also been investigated by the EU and a State Aid ruling was issued in August 2016. According to the ruling “Ireland granted illegal tax benefits to Apple” and the European Commission ordered Apple to pay €13 billion, plus interest, in unpaid Irish taxes from 2004–14 to the Irish state. U.S. Senate scrutiny of Apple Inc.’s tax strategies back in 2009 turned the spotlight on a stateless entity with $30 billion in profit since 2009 that’s incorporated in Ireland, controlled by a board in California, and didn’t pay taxes in either place ... Continue to full case
India vs. Vodafone India Services Pvt Ltd, Jan 2018, ITA No.565 Ahd 2017

India vs. Vodafone India Services Pvt Ltd, Jan 2018, ITA No.565 Ahd 2017

The 2018 Vodafone case from India – whether termination of option rights under an agreement can be treated as a “deemed international transaction” under section 92B(2) of the Income Tax Act. Vodafone India Services had a call option to buy shares in SMMS Investment Pvt Ltd — which held 5.11% equity capital of the Vodafone India through a web of holdings for 2.78 crore if the fair market value of these shares was less than 1,500 crore. If the fair market value was higher, it had to pay a little more. Under the same agreement, if Vodafone India Services terminated its right to acquire the share, the company would have to pay Rs 21.25 crore. Instead of exercising the call option and acquiring the valuable shares at a very low price, Vodafone India Service terminated the option and paid 21.25 crore. The tax administration held that the Vodafone India Service should have received a substantial consideration for not exercising the ... Continue to full case
Africa - Mining and Transfer Pricing

Africa – Mining and Transfer Pricing

Most Sub Saharan African jurisdictions see the area of mineral transfers/sales as the main transfer pricing risk, but only few have systems in place to check if prices applied to minerals transferred to related parties comply with the arm’s length principle. Studies highlights a strong need for capacity strengthening in the area of transfer pricing throughout the African continent and for enhancing the knowledge of mining industry within tax authorities. South Africa has, for many years, been the leader in transfer pricing audits among the African countries. But emerging countries such as Nigeria, Ghana, Kenya, Tanzania, Mozambique, are now making a concerted effort to develop transfer pricing capability. In Tanzania, for example, the Acasia Mining Plc. was recently  issued a USD 190 billion tax bill. The assessment demonstrates a strong political will in Africa to address transfer pricing non-compliance. A paper commissioned by the World Bank highlights transfer pricing issues within the African Mining industry. Not surprisingly, it seems that most of the transfer pricing problems relates ... Continue to full case
European Commission vs. Netherlands and IKEA, Dec. 2017

European Commission vs. Netherlands and IKEA, Dec. 2017

The European Commission has opened an in-depth investigation into the Netherlands’ tax treatment of Inter IKEA, one of the two groups operating the IKEA business. The Commission has concerns that two Dutch tax rulings may have allowed Inter IKEA to pay less tax and given them an unfair advantage over other companies, in breach of EU State aid rules. Commissioner Margrethe Vestager in charge of competition policy said: “All companies, big or small, multinational or not, should pay their fair share of tax. Member States cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere. We will now carefully investigate the Netherlands’ tax treatment of Inter IKEA.” In the early 1980s, the IKEA business model changed into a franchising model. Since then, it has been the Inter IKEA group that operates the franchise business of IKEA, using the “IKEA franchise concept”. What this means more concretely is that Inter IKEA does not own the ... Continue to full case
US vs. Hewlett Packard, November 2017, Court of Appeals, Case No 14-73047

US vs. Hewlett Packard, November 2017, Court of Appeals, Case No 14-73047

This issue in this case is qualification of an investment as debt or equity. HP bought preferred stock in Foppingadreef Investments, a Dutch company. Foppingadreef Investments bought contingent interest notes, from which FOP’s preferred stock received dividends that HP claimed as foreign tax credits. HP claimed millions in foreign tax credits between 1997 and 2003, then exercised its option to sell its preferred shares for a capital loss of more than $16 million. The IRS characterized the transaction as debt, and denied the tax credits claimed by Hewlett Packard. First the Tax Court and later the Court of Appeal agreed with the tax authorities. The eleven factors considered by the Court when qualifying an investment as debt/equity the names given to the certificates evidencing the indebtedness; the presence or absence of a maturity date; the source of the payments; the right to enforce the payment of principal and interest; participation and management; a status equal to or inferior to that of ... 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
Australian Parliament Hearings - Tax Avoidance

Australian Parliament Hearings – Tax Avoidance

In a public hearing held 22 August 2017 in Sydney Australia by the Economics References Committee, tech companies IBM, Microsoft, and Apple were called to the witnesses stand to explain about tax avoidance schemes – use of “regional headquarters” in low tax jurisdictions (Singapore, Ireland and the Netherlands) to avoid or reduce taxes. Follow the ongoing Australian hearings into corporate tax avoidance on this site: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th Transcript from the hearing: Tax Avoidance, Australian Senate Hearing, 22 August 2017 ... 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
Germany vs A Investment GmbH, June 2017, Cologne Fiscal Court , Case no 10 K 771/16

Germany vs A Investment GmbH, June 2017, Cologne Fiscal Court , Case no 10 K 771/16

A Investment GmbH, acquired all shares of B in May 2012. To finance the acquisition, A Investment GmbH took up a bank loan with a interest rate of 4.78%, a vendor loan with an interest rate of 10% and a shareholder loan with an interest rate 8% from its parent company, Capital B.V. The 8 % interest rate on the shareholder loan was determined by A Investment GmbH by applying the CUP method based on external comparables. The German tax authority, found that the interest rate of 8 % did not comply with the arm’s length principle. An assessment was issued where the interest rate was set to 5% based on the interest rate on the bank loan (internal CUP). A Investment GmbH filed an appeal to Cologne Fiscal Court. The court ruled that the interest rate of the bank loan, 4.78%, was a reliable CUP for setting the arm’s length interest rate of the controlled loan. The vendor loan was ... Continue to full case
European Commission vs. The Netherlands and Starbucks, March 2017 and October 2015, State Aid Investigation

European Commission vs. The Netherlands and Starbucks, March 2017 and October 2015, State Aid Investigation

The European Commission’s investigation on granting of selective tax advantages to Starbucks BV, cf. EU state aid rules. EU-vs-Starbucks-March-2017-State-Aid-investigation-2 EU-Starbucks-2015 ... Continue to full case