Adobe Systems Co., a Japanese subsidiary of Adobe Systems Inc., received remuneration from Dutch and Irish group companies for promotion and marketing of Adobe software sold in Japan The remuneration of Adobe Systems Co. was determined as general administrative expenses plus 1.5% of net sales in Japan. A transfer pricing assessment was issued by the Japanese tax authorities where transfer prices were instead based profit margins derived in comparable transactions. Adobe Systems filed an appeal seeking revokal of the assessment. Tokyo High Court held that the tax assessment should be revoked. The burden of proof in relation to the legitimacy of the transfer pricing method applied was on the tax administration. The transfer pricing method used by the tax authority was not consistent with the resale price method. The method applied by the tax authorities “…cannot be said to be “a method equivalent to the resale price standard method” prescribed in Article 66-4, Paragraph 2, Item 2, b of the ... Read more

Prévost is a resident Canadian corporation who declared and paid dividends to its shareholder Prévost Holding B.V. (“PHB.V.”), a corporation resident in the Netherlands. When Prévost paid the dividends it withheld five percent in tax. The tax authorities issued an assessments against Prévost in respect of the aforementioned dividends. The tax authorities assessed on the basis that the beneficial owners of the dividends were the corporate shareholders of PHB.V., a resident of the United Kingdom and a resident of Sweden, and not PHB.V. itself. An appeal was filed with the tax court by the company. “… one does not pierce the corporate veil unless the corporation is a conduit for another person and has absolutely no discretion as to the use or application of funds put through it as conduit, or has agreed to act on someone else’s behalf pursuant to that person’s instructions without any right to do other than what that person instructs it, for example, a stockbroker ... Read more

“Guarantee Co. Ltd.” owned all the shares of G, a company located in the Netherlands, and had provided financial guarantees for loans – in the form of so called “keep well agreements” and guarantee agreements. The main issue in this case is whether or not it was possible to calculate an arm’s length price for the consideration for the guarantee issued. Judgement of the National Tax Tribunal The Tax Tribunal came to the conclusion that the price for the guarantees could be determined based on the CUP method and set at 0,10% of the guaranteed amounts. Excerpt “Therefore, a comparative study of the conclusion of each of the Keep Well Agreements, etc. in question and the Bank Guarantee Transactions in question shows that, as stated in (a) of (b) above, the conclusion of each of the Keep Well Agreements, etc. in question is found to have a function substantially equivalent to a guarantee, although there are differences in the contract ... Read more

A German group company’s payment for use of the group name was not found to be deductible under German transfer pricing regulations. Guidance on payments for use of the group name has been provided in the Transfer Pricing Guidelines 6.81 – 6.85 and 7.12. As a general rule, no payment should be recognised for transfer pricing purposes for simple recognition of group membership or the use of the group name merely to reflect the fact of group membership. However, where one member of the group is the owner of a trademark or other intangible for the group name, and where use of the name provides a financial benefit to members of the group other than the member legally owning such intangible, it is reasonable to conclude that a payment for use would have been made in arm’s length transactions. In determining the amount of payment with respect to a group name, it is important to consider the amount of the ... Read more