Tag: No written terms

Chile vs Wallmart Chile S.A, October 2020, Tax Court, Case N° RUC N° 76.042.014K

Chile vs Wallmart Chile S.A, October 2020, Tax Court, Case N° RUC N° 76.042.014K

In 2009, Walmart acquired a majority in Distribución y Servicio D&S S.A., Chile’s leading food retailer. With headquarters in Santiago, Walmart Chile operates several formats including hypermarkets, supermarkets and discount stores. Following an audit by the tax authorities related to FY 2015, deduction of interest payments in the amount of CH$8.958,304,857.- on an “intra-group loan” was denied resulting in a tax payable of Ch$1,786,488,290. According to Wallmart, the interest payments related to debt in the form of future dividend payments/profit distributions. Decision of the Tax court “…this Court concludes that the claimant has not been able to prove the existence of a current account between Inversiones Walmart and Walmart Chile, nor has it been able to prove the appropriateness of the reduction in expenses in the amount of CH$8.958,304,857.- for interest paid to its related company, because it did not justify the need for such disbursement for the purpose of getting into debt in order to distribute profits among the ... Continue to full case
Poland vs Cash Pool B sp z.o.o., November 2019, Supreme Administrative Court, Case No II FSK 3798/17

Poland vs Cash Pool B sp z.o.o., November 2019, Supreme Administrative Court, Case No II FSK 3798/17

At issue in this case was whether a deposit in a cash pool constituted a loan. According to the company, cash transfers made as part of cash pooling cannot be considered a loan agreement because they do not contain elements that are material to the content of such contracts. In 2018 the provincial court issued a decision stating that a cash pool deposit constituted the granting of a loan irrespective of lacking written contracts. This decision was then appealed to the Supreme Administrative Court by the company. From the decision of the Supreme Administrative Court From an economic point of view, the financial system presented in the application involves the granting of loans because, as a result of financing the negative balance shown by the contractual participant by a surplus of funds accumulated by other participants, the participant is not obliged to pay interest to the bank for his debit an invoice that would have arisen if the shortcoming had ... Continue to full case

TPG2017 Chapter IX paragraph 9.83

Once the existence or absence of an indemnification clause in favour of the restructured entity upon termination, non-renewal or substantial renegotiation of the agreements has been determined, the analysis should then focus on assessing whether such indemnification clause and its terms (or absence thereof) are arm’s length. Where comparables data evidence a similar indemnification clause (or absence thereof) in comparable circumstances, the indemnification clause (or absence thereof) in a controlled transaction will be regarded as arm’s length ... Continue to full case

TPG2017 Chapter IX paragraph 9.82

As noted at paragraph 1.46, in transactions between independent enterprises, the divergence of interests between the parties ensures that: (i) contractual terms are concluded that reflect the interest of both parties, (ii) the parties will ordinarily seek to hold each other to the terms of the contract, and (iii) that contractual terms will be ignored or modified after the fact generally only if it is in the interests of both parties. However, this same divergence of interest may not exist in the case of associated enterprises or any such divergences may be managed in ways facilitated by the relationship between the associated enterprises and not solely or mainly through contractual agreements. For this reason, when the facts of the case differ from the written terms of the agreement between the parties or when no written terms exist, the absence or existence (and its terms) of an indemnification clause should be deduced from the conduct of the parties. For instance, it ... Continue to full case

TPG2017 Chapter VII paragraph 7.18

The fact that a payment was made to an associated enterprise for purported services can be useful in determining whether services were in fact provided, but the mere description of a payment as, for example, “management fees” should not be expected to be treated as prima facie evidence that such services have been rendered. At the same time, the absence of payments or contractual agreements does not automatically lead to the conclusion that no intra-group services have been rendered ... Continue to full case

TPG2017 Chapter VI paragraph 6.36

Where no written terms exist, or where the facts of the case, including the conduct of the parties, differ from the written terms of any agreement between them or supplement these written terms, the actual transaction must be deduced from the facts as established, including the conduct of the parties (see Section D. 1.1 of Chapter I). It is, therefore, good practice for associated enterprises to document their decisions and intentions regarding the allocation of significant rights in intangibles. Documentation of such decisions and intentions, including written agreements, should generally be in place at or before the time that associated enterprises enter into transactions leading to the development, enhancement, maintenance, protection, or exploitation of intangibles ... Continue to full case

TPG2017 Chapter I paragraph 1.49

Where no written terms exist, the actual transaction would need to be deduced from the evidence of actual conduct provided by identifying the economically relevant characteristics of the transaction. In some circumstances the actual outcome of commercial or financial relations may not have been identified as a transaction by the MNE, but nevertheless may result in a transfer of material value, the terms of which would need to be deduced from the conduct of the parties. For example, technical assistance may have been granted, synergies may have been created through deliberate concerted action (as discussed in Section D.8), or know-how may have been provided through seconded employees or otherwise. These relations may not have been recognised by the MNE, may not be reflected in the pricing of other connected transactions, may not have been formalised in written contracts, and may not appear as entries in the accounting systems. Where the transaction has not been formalised, all aspects would need to ... Continue to full case
Philippines vs Filinvest Development Corporation, July 2011, Supreme Court, G.R. No. 163653

Philippines vs Filinvest Development Corporation, July 2011, Supreme Court, G.R. No. 163653

In the Filinvest case an assessment had been issued where the tax authorities had imputed interest on an interest free loan. Judgement of the Tax Court The Court set aside the assessment. The tax authorities power to allocate gross income does not include the power to impute ‘theoretical interest’ because there must be actual or, at the very least, probable receipt or realisation by the taxpayer of the income that is being allocated. Philippines vs Filinvest Development Corporation July 2011 Supreme Court 163653y ... Continue to full case