Tag: Sham doctrine

Brazil vs Marcopolo SA, September 2011, Administrative Court of Appeal (CARF), Case  No. 11020.004863/200719 - 1402-00.752 and 1402-00.753 and 1402-00.754

Brazil vs Marcopolo SA, September 2011, Administrative Court of Appeal (CARF), Case No. 11020.004863/200719 – 1402-00.752 and 1402-00.753 and 1402-00.754

The Brazilian group Marcopolo assembles bus bodies in Brazil for export. It used two related offshore companies, Marcopolo International Corporation, domiciled in the British Virgin Islands, and Ilmot International Corporation, domiciled in Uruguay, in a re-invoicing arrangement whereby the product was shipped from Marcopolo to the customers but the final invoice to the customers was issued by the related companies. The tax authorities found that the arrangement lacked business purpose and economic substance and, on this basis, disregarded the transactions. Decision of the Administrative Court of Appeal The Court ruled in favour of Marcopolo SA. The Court found that, although the offshore companies did not perform any functions other than invoicing sales and contract functions, if the transfer pricing methodology was complied with, the minimum profitability required by the anti-avoidance rule was sufficient for the set-up to be considered legal. Click here for English Translation Click here for other translation 140200752_11020004863200719_201109 ... Read more
Brazil vs Marcopolo SA, June 2008, Administrative Court of Appeal (CARF), Case  No. 11020.004103/2006-21, 105-17.083

Brazil vs Marcopolo SA, June 2008, Administrative Court of Appeal (CARF), Case No. 11020.004103/2006-21, 105-17.083

The Brazilian group Marcopolo assembles bus bodies in Brazil for export. It used two related offshore companies, Marcopolo International Corporation, domiciled in the British Virgin Islands, and Ilmot International Corporation, domiciled in Uruguay, in a re-invoicing arrangement whereby the product was shipped from Marcopolo to the final customers but the final invoice to the customers was issued by the offshore companies. The tax authorities found that the arrangement lacked business purpose and economic substance and, on this basis, disregarded the transactions. Decision of the Administrative Court of Appeal The Court ruled in favour of Marcopolo. According to the Court, the transactions with the offshore companies had a business purpose and were therefore legitimate tax planning. Excerpts “6. The absence of an operational structure of the companies controlled by the Appellant, capable of supporting the transactions performed, even if, in isolation, it could be admitted within the scope of a “rational organization of the economic activity”, in the case at hand, ... Read more