Tag: Non-deductible costs

Panama vs "Pharma Distributor S.A.", July 2021, Administrative Tax Court, Case No TAT-RF-066

Panama vs “Pharma Distributor S.A.”, July 2021, Administrative Tax Court, Case No TAT-RF-066

An adjustment for FY 2013 and 2014 had been issued to a pharmaceutical company in Panama “Pharma Distributor S.A” that resulted in an income adjustment of 19.5 million dollars, which in turn resulted in additional taxes of 2.4 million dollars. The resale price method had been used by Pharma Distributor S.A. to determine the market value of an asset acquired from a related entity that was sold to an independent entity. This method was rejected by the tax authorities based on the fact that the analysis presented by the taxpayer did not meet the requirements for application of the method. The tax authorities instead applied a TNMM. The tax authorities also rejected tax deductions for expenses purportedly paid for administrative services due to the absence of supporting documentation. Provisions of article 762-G “Administrative services received” in the Tax Code in Panama contemplates tax deductibility for such expenses exclusively when services have actually been rendered to the benefit of the recipient ... Continue to full case
France vs Société Générale S.A., Feb 2021, Administrative Court of Appeal, Case No 16VE00352

France vs Société Générale S.A., Feb 2021, Administrative Court of Appeal, Case No 16VE00352

Société Générale S.A. had paid for costs from which its subsidiaries had benefited. The costs in question was not deducted by Société Générale in its tax return, but nor had they been considered distribution of profits subject to withholding tax. Following an audit for FY 2008 – 2011 a tax assessment was issued by the tax authorities according to which the hidden distribution of profits from which the subsidiaries benefited should have been subject to withholding tax in France Société Générale held that the advantage granted by the parent company in not recharging costs to the subsidiaries resulted in an increase in the valuation of the subsidiaries. It also argued that the advantages in question were not “hidden” since they were explicitly mentioned in the documents annexed to the tax return By judgment of 11 October 2018, the court of first instance discharged the withholding taxes as regards the absence of re-invoicing of costs incurred on behalf of the subsidiaries located ... Continue to full case
Italy vs Rohm and Haas Italia s.r.l, Febuary 2020, Supreme Court Case No 3599 13/02/2020

Italy vs Rohm and Haas Italia s.r.l, Febuary 2020, Supreme Court Case No 3599 13/02/2020

At issue was deduction of VAT on purported costs incurred for intra-group services, which had been deemed non-deductible for tax as well as VAT purposes by the Italien Tax Authorities, as the taxpayer had not been able to prove the effectiveness and relevance of these services. The Supreme Court found that in order for intra-group cost to be deductible (and VAT deductible) taxpayer must prove that, a real service have been received which is objectively determinable and adequately documented. This burden of proof had not been lifted by the taxpayer and VAT payments on the purported services were consequently non-deductible. Click here for English translation Sentenza Cassazione Civile n. 3599 del 13022020 ... Continue to full case
Poland vs Shared Service Center, February 2020, Administrative Court, SA/PO 935/19

Poland vs Shared Service Center, February 2020, Administrative Court, SA/PO 935/19

A shared service center in Poland both provided intra-group services to the group and in doing so also received and paid for services from other group companies. At issue was payments for the services that the Shared Service Center in Poland received. Under some circumstances intra-group service costs are non-deductible in Poland according to local anti-avoidance provisions aimed at base eroding payments, and according to the tax authorities the payments for intra group services received by the Shared Service Center were non-deductible according to these anti-avoidance provisions. The tax authorities had considered that the payments for the received services were non-deductible according to these provisions. Court decision Service costs that are directly connected with provision of services that generate income, and are included in the base for remuneration of the services provided are deductable and thus not covered by the non-deduction provisions. The Company’s revenues in connection with the support provided to related entities (domestic and foreign) was calculated based ... Continue to full case
Mexico vs "Drink Distributor S.A.", April 2019, TRIBUNAL FEDERAL DE JUSTICIA ADMINISTRATIVA, Case No 15378/16-17-09-2/1484/18-S2-08-04

Mexico vs “Drink Distributor S.A.”, April 2019, TRIBUNAL FEDERAL DE JUSTICIA ADMINISTRATIVA, Case No 15378/16-17-09-2/1484/18-S2-08-04

“Drinks Distributor S.A.” was involved in purchase, sale and distribution of alcoholic beverages in Mexico. “Drinks Distributor s.a” had entered into a non-exclusive trademark license agreement with a related party for the sale of its product. Following a restructuring process, the related party moved to Switzerland. Following an audit the Mexican tax administration, determined that deductions for marketing and advertising costs related to brands and trademarks used under the licensing agreement, were not “strictly indispensable” and therefore not deductible, cf. requirement established by the Income Tax Law in Mexico. Drinks Distributor S.A on its side held that the marketing and advertising costs were strictly indispensable and that the tax deductions should be accepted. The dispute ended up in the Federal Court of Administrative Justice. Judgement: The Court determined what should be understood as “strictly indispensable“. To establish this concept the purposes of the specific company and the specific costs must first be determined – in particular that the costs are ... Continue to full case
Spain vs Dell, June 2016, Supreme Court, Case No. 1475/2016

Spain vs Dell, June 2016, Supreme Court, Case No. 1475/2016

Dell Spain is part of a multinational group (Dell) that manufactures and sells computers. Dell Ireland, operates as distribution hub for most of Europe. Dell Ireland has appointed related entities to operate as its commissionaires in several countries; Dell Spain and Dell France are part of this commissionaire network. The group operates through a direct sales model and sales to private customers in Spain are conducted by Dell France, through a call centre and a web page. Dell Spain use to operate as a full-fledged distributor, but after entering into a commissionaire agreement Dell Spain now served large customers on behalf of Dell Ireland. A tax assessment was issued by the tax authorities. According to the assessment the activities in Spain constituted a Permanent Establishment of Dell Ireland to which profits had to allocated for FY 2001-2003. Judgement of the Supreme Court The Supreme Court concludes that the activities of Dell Spain constitutes a Permanent Establishment of Dell Ireland under ... Continue to full case