Tag: Sham transactions
A transaction without substance, which will be ignored for tax purposes.
/ Commodity Transactions, Delineation - Substance over Form, Recharacterise, Sales and Marketing Hubs, Sham transactions, Swiss trading hub, Switzerland, Tax Avoidance Schemes, Uranium
Canadian mining company, Cameco Corp., sells uranium to a wholly owned trading hub, Cameco Europe Ltd., registred in low tax jurisdiction, Switzerland, which then re-sells the uranium to independent buyers. The parties had entered into a series of controlled transactions related to this activity and as a result the Swiss trading hub, Cameco Europe Ltd., was highly profitable. Following an audit, the Canadian tax authorities issued a transfer pricing tax assessment covering years 2003, 2005, 2006, and later tax assessments for subsequent tax years, adding up to a total of approximately US 1.5 bn in taxes, interest and penalties. The tax authorities first position was that the controlled purchase and sale agreements should be disregarded as a sham as all important functions and decisions were in fact made by Cameco Corp. in Canada. As a second and third position the tax authorities held that the Canadian transfer pricing rules applied to either recharacterise or reprice the transactions. The Tax Court concluded that the ... Continue to full case
/ economic substance doctrine, Financial Transactions, Foreign Tax Credit (FTC) , General Anti-Avoidance Rules (GAAR), Santander, Sham transactions, STARS transaction, Tax Avoidance Schemes
Santander Holding USA is a financial-services company that used a tax strategy called Structured Trust Advantaged Repackaged Securities (STARS) to generate more than $400 million in foreign tax credits. The scheme was developed and promoted to several U.S. banks by Barclays Bank PLC, a U.K. financial-services company, and the accounting firm KPMG, LLC. The Internal Revenue Service (IRS) ultimately concluded that the STARS transaction was a sham, and that the economic-substance doctrine therefore prohibited petitioner from claiming the foreign tax credits. The STARS-scheme was designed to transform the foreign tax credit into economic profit, at the expense of the U.S. Treasury. STARS involved an arrangement whereby the U.S. taxpayer paid tax to the United Kingdom, claimed a foreign tax credit for that U.K. tax, and simultaneously recouped a substantial portion of its U.K. tax. Instead of the typical one-to-one correlation of credits claimed to taxes paid, the taxpayer thus received one dollar in U.S. tax credits for substantially less than ... Continue to full case
In this case the Court held that while a “colourable device” could result in the transaction being considered a sham, that did not mean that tax planning within the law will not be permitted. India vs Azadi-Bachao-Andolan ... Continue to full case