Tag: Recharacterisation

Israel vs Medingo Ltd, May 2022, District Court, Case No 53528-01-16

Israel vs Medingo Ltd, May 2022, District Court, Case No 53528-01-16

In April 2010 Roche pharmaceutical group acquired the entire share capital of the Israeli company, Medingo Ltd, for USD 160 million. About six months after the acquisition, Medingo was entered into 3 inter-group service agreements: a R&D services agreement, pursuant to which Medingo was to provide R&D services in exchange for cost + 5%. All developments under the agreement would be owned by Roche. a services agreement according to which Medingo was to provided marketing, administration, consultation and support services in exchange for cost + 5%. a manufacturing agreement, under which Medingo was to provide manufacturing and packaging services in exchange for cost + 5. A license agreement was also entered, according to which Roche could now manufacture, use, sell, exploit, continue development and sublicense to related parties the Medingo IP in exchange for 2% of the relevant net revenues. Finally, in 2013, Medingo’s operation in Israel was terminated and its IP sold to Roche for approximately USD 45 million ... Read more
US vs TBL LICENSING LLC, January 2022, U.S. Tax Court, Case No. 158 T.C. No 1 (Docket No. 21146-15)

US vs TBL LICENSING LLC, January 2022, U.S. Tax Court, Case No. 158 T.C. No 1 (Docket No. 21146-15)

A restructuring that followed the acquisition of Timberland by VF Enterprises in 2011 resulted in an intra-group transfer of ownership to valuable intangibles to a Swiss corporation, TBL Investment Holdings. The IRS was of the opinion that gains from the transfer was taxable. Judgement of the US Tax Court The tax court upheld the assessment of the tax authorities. Excerpt: “we have concluded that petitioner’s constructive distribution to VF Enterprises of the TBL GmbH stock that petitioner constructively received in exchange for its intangible property was a “disposition” within the meaning of section 367(d)(2)(A)(ii)(II). We also conclude, for the reasons explained in this part IV, that no provision of the regulations allows petitioner to avoid the recognition of gain under that statutory provision.” “Because we do not “agree[] to reduce the adjustment to income for the trademarks based on a 20-year useful life limitation, pursuant to Temp. Treas. Reg. § 1.367(d)-1T,” we determine, in accordance with the parties’ stipulation, that ... Read more
Hungary vs G.K. Ktf, December 2021, Court of Appeals, Case No. Kfv.V.35.306/2021/9

Hungary vs G.K. Ktf, December 2021, Court of Appeals, Case No. Kfv.V.35.306/2021/9

G.K. Ktf was a subsidiary of a company registered in the United Kingdom. On 29 December 2010 G.K. Ktf entered into a loan agreement with a Dutch affiliate, G.B. BV, under which G.B. BV, as lender, granted a subordinated unsecured loan of HUF 3 billion to G.K. Ktf. Interest was set at a fixed annual rate of 11.32%, but interest was only payable when G.K. Ktf earned a ‘net income’ from its activities. The maturity date of the loan was 2060. The loan was used by G.K. Ktf to repay a debt under a loan agreement concluded with a Dutch bank in 2006. The bank loan was repaid in 2017/2018. The interest paid by G.K. Ktf under the contract was deducted as an expense of HUF 347,146,667 in 2011 and HUF 345,260,000 in 2012. But, in accordance with Dutch tax law – the so called participation exemption – G.B BV did not include the interest as taxable income in its ... Read more
Denmark vs EAC Invest A/S, October 2021, High Court, Case No SKM2021.705.OLR

Denmark vs EAC Invest A/S, October 2021, High Court, Case No SKM2021.705.OLR

In 2019, the Danish parent company of the group, EAC Invest A/S, had been granted a ruling by the tax tribunal that, in the period 2008-2011, due to, inter alia, quite exceptional circumstances involving currency restrictions in Venezuela, the parent company should not be taxed on interest on a claim for unpaid royalties relating to trademarks covered by licensing agreements between the parent company and its then Venezuelan subsidiary, Plumrose Latinoamericana C.A. The Tax tribunal had also found that neither a payment of extraordinary dividends by the Venezuelan subsidiary to the Danish parent company in 2012 nor a restructuring of the group in 2013 could trigger a deferred taxation of royalties. The tax authorities appealed against the decisions to the High Court. Judgement of the High Court The High Court upheld the decisions of the tax tribunal with amended grounds and dismissed the claims of the tax authorities. Excerpts: Interest on unpaid royalty claim “The High Court agrees that, as ... Read more
Poland vs A S.A., June 2021, Provincial Administrative Court, Case No I SA/Gl 1649/20

Poland vs A S.A., June 2021, Provincial Administrative Court, Case No I SA/Gl 1649/20

The business activity of A S.A. was wholesale of pharmaceutical products to external pharmacies, hospitals, wholesalers (including: to affiliated wholesalers). The tax authority had noted that the company’s name had been changed in FY 2013, and a loss in the amount of PLN […] had been reported in the company’s tax return. An audit revealed that the Company had transferred significant assets (real estate) to a related entity on non-arm’s length terms. The same real estate was then going forward made available to the company on a fee basis under lease and tenancy agreements. The tax authority issued an assessment where a “restructuring fee” in the amount of PLN […] was added to the taxable income, reflecting the amount which would have been achieved if the transaction had been agreed between independent parties. According to the company the tax authority was not entitled at all to examine the compliance of the terms of these transactions with the terms that would ... Read more
Peru vs. "P Services", July 2020, Tax Court, Case No 03052-5-2020

Peru vs. “P Services”, July 2020, Tax Court, Case No 03052-5-2020

“P Services! provided services to a Peruvian consortium. In 2014, the parties entered into an interest-free loan agreement. According to the loan agreement, payment for the services performed in 2013 was going to be offset against the funds received under the agreement. The tax authorities found that the “loan arrangement”, in reality constituted advances for the services provided by “P Services”- According to the authorities the arrangement had been established for the purpose of avoiding VAT on the advances received for the services. Decision of the Tax Court The tax court issued a decision in favour of the tax authorities. Click here for English translation Click here for other translation Peru vs Taxpayer 2020_5_03052 (002) ... Read more