Tag: No substance

India vs. Li & Fung (Trading) Ltd. March 2016, ITTA

India vs. Li & Fung (Trading) Ltd. March 2016, ITTA

Li & Fung (Trading) Ltd., Hong Kong, entered into contracts with its global third party customers for provision of sourcing services with respect to products to be sourced by such global customers directly from third party vendors in India. For the sourcing services, the Hong Kong company received a 5% commission of the FOB value of goods sourced. The company in India was providing sourcing support services to the Hong Kong group company, and remunerated at cost plus 5 percent mark-up for provision of these services. The tax administration found that the the company in India should get the 5% commission on the free on board (FOB) value of the goods sourced from India as the Hong Kong company contributed no value. The Tribunal held that the compensation received by the company in Hong Kong – 5% of the FOB value – should be distributed between the company in India and the company in Hong Kong in the ratio of 80:20 based on there functional profiles. • The company in India had actually performed all ... Continue to full case
Switzerland vs. Finanz AG, Oct. 2012, Federal Supreme Court, Case No 2C_708/2011

Switzerland vs. Finanz AG, Oct. 2012, Federal Supreme Court, Case No 2C_708/2011

A company of a Swiss based group maintained a permanent establishment in the Cayman Islands for financing the domestic group companies. Whereas the group companies were able to deduct the interest payments from the taxable profit to their full extent, the interest income, for Swiss tax purposes, was allocated to the permanent establishment in the Cayman Islands, and therefore led to non-taxation of this interest income. By interpreting the legal term “foreign permanent establishment” the Federal Supreme Court concluded that the finance company in the Cayman Islands had only four employees and that such a lean structures was in contrast to the figures in the annual accounts. Therefore, it denied the allocation of interest income to the Cayman Islands for Swiss tax purposes. Click here for English translation Federal Tax Administration against X. Finanz AG ... Continue to full case