Tag: Royalties

Payments of any kind received as consideration for the use of, or the right to use intellectual property, such as a copyright, patent, trade mark, design or model, plan, secret formula or process.

European Commission vs. The Netherlands and Starbucks, September 2019, General Court of the European Union, Case No. T-760/15

European Commission vs. The Netherlands and Starbucks, September 2019, General Court of the European Union, Case No. T-760/15

In 2008, the Netherlands tax authorities concluded an advance pricing arrangement (APA) with Starbucks Manufacturing EMEA BV (Starbucks BV), part of the Starbucks group, which, inter alia, roasts coffees. The objective of that arrangement was to determine Starbucks BV’s remuneration for its production and distribution activities within the group. Thereafter, Starbucks BV’s remuneration served to determine annually its taxable profit on the basis of Netherlands corporate income tax. In addition, the APA endorsed the amount of the royalty paid by Starbucks BV to Alki, another entity of the same group, for the use of Starbucks’ roasting IP. More specifically, the APA provided that the amount of the royalty to be paid to Alki corresponded to Starbucks BV’s residual profit. The amount was determined by deducting Starbucks BV’s remuneration, calculated in accordance with the APA, from Starbucks BV’s operating profit. In 2015, the Commission found that the APA constituted aid incompatible with the internal market and ordered the recovery of that ... Continue to full case
US vs Medtronic, August 2018, U.S. Court of Appeals, Case No: 17-1866

US vs Medtronic, August 2018, U.S. Court of Appeals, Case No: 17-1866

The IRS was of the opinion, that Medtronic erred in allocating the profit earned from its devises and leads between its businesses located in the United States and its device manufacturer in Puerto Rico. To determine the arm’s length price for Medtronic’s intercompany licensing agreements the comparable profits method was therefor applied by the IRS, rather than the comparable uncontrolled transaction (CUT) used by Medtronic. Medtronic brought the case to the Tax Court. The Tax Court applied its own valuation analysis and concluded that the Pacesetter agreement was the best CUT to calculate the arm’s length result for intangible property. This decision from the Tax Court was then appealed by the IRS to the Court of Appeals. The Court of Appeal found that the Tax Court’s factual findings were insufficient to enable the Court to conduct an evaluation of Tax Court’s determination. Specifically, the Tax Court failed to: address whether the circumstances of the Pacesetter settlement was comparable to the licensing ... Continue to full case
European Commission vs. The Netherlands and Starbucks, March 2017 and October 2015, State Aid Investigation

European Commission vs. The Netherlands and Starbucks, March 2017 and October 2015, State Aid Investigation

The European Commission’s investigation on granting of selective tax advantages to Starbucks BV, cf. EU state aid rules. EU-vs-Starbucks-March-2017-State-Aid-investigation-2 EU-Starbucks-2015 ... Continue to full case

Luxembourg vs Lux SA, December 2016, Administrative Tribunal Case No 36954

By a trademark license agreement dated August 22, 2008, a group company in Luxembourg granted another group company a non-exclusive right to use and exploit the brands registered in the territory of the Grand Duchy of Luxembourg, Benelux and the European Community for an initial period of ten years, renewable tacitly each time for a period of one year and this against a license fee paid and calculated annually corresponding to 3% of this turnover. By letters of 30 January 2015, the Tax Office informed the company that they intended to refuse to deduct the royalties paid to the company for the years 2010, 2011 and 2010. Click here for translation Lux vs taxpayer 21 dec 2016 36954 ... Continue to full case
Australia vs. Tech Mahindra Limited, September 2016, Federal Court, Case no. 2016 ATC 20-582

Australia vs. Tech Mahindra Limited, September 2016, Federal Court, Case no. 2016 ATC 20-582

This case is about the interpretation of Article 7 (the business profits rule) and Article 12 (the royalties provision) of the Agreement between the Government of Australia and the Government of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The issue was misuse of the provision in article 12 about cross-border royalties and article 7 about business profits. The case was brought before the Supreme Court, where special leave to appeal was refused 10 March 2017. Australia-vs-TECH-MAHINDRA-LIMITED-September-2016-Federal-Court-case-no-2016-ATC-20-582 ... Continue to full case
US vs. Medtronic Inc. June 2016, US Tax Court

US vs. Medtronic Inc. June 2016, US Tax Court

The IRS argued that Medtronic Inc failed to accurately account for the value of trade secrets and other intangibles owned by Medtronic Inc and used by Medtronic’s Puerto Rico manufacturing subsidiary in 2005 and 2006 when determening the royalty payments from the subsidiary. In 2016 the United States Tax Court found in favor of Medtronic, sustaining the use of the CUT method to analyze royalty payments. The Court also found that adjustments to the CUT were required. These included additional adjustments not initially applied by Medtronic Inc for know-how, profit potential and scope of product. The decision from the United States Tax Court has been appealed by the IRS in 2017. US-Memo-2016-112-Medtronic-v.-Commissioner ... Continue to full case
Italy vs Computer Associates SPA, February 2013, Supreme Court no 4927

Italy vs Computer Associates SPA, February 2013, Supreme Court no 4927

This case is about royalties paid by an Italian company to a US associated company. The tax authorities had challenged the inter-company royalty paid (7%) despite the fact that the taxpayer had provided an economic analysis that justified a higher royalty rate. The Supreme Court ruled in favor of the tax administration. Click here for translation Italy Supreme-Court-27-February-2013-No.-4927.pdf ... Continue to full case
Germany vs Trademark GmbH, November 2006, FG München, Case No 6 K 578/06

Germany vs Trademark GmbH, November 2006, FG München, Case No 6 K 578/06

A German company on behalf of its Austrian Parent X-GmbH distributed articles and products manufactured by the Austrian X-KG. By a contract of 28 May 1992, X-GmbH granted the German company the right to use the trade mark ‘X’ registered in Austria; According to the agreement the German company paid a license fee for the right. As early as 1991, X-GmbH had also granted X-KG a corresponding right; By a contract dated 1 July 1992, X-KG pledged to the applicant exclusive distribution rights for the Federal Republic of Germany. In the meantime, the mark ‘X’ had been registered as a Community trade mark in the Internal Market. The tax authorities dealt with the payment of royalties to X-GmbH for the years in question as vGA (hidden profit distribution). Click here for translation K 578-06 ... Continue to full case