Tag: Software services

India vs ST Microelectronics Pvt. Ltd., September 2020, Income Tax Tribunal, ITA No.6169/Del./2012

India vs ST Microelectronics Pvt. Ltd., September 2020, Income Tax Tribunal, ITA No.6169/Del./2012

ST Microelectronics Pvt. Ltd. is a subsidiary of ST Microelectronics Pte. Ltd. which in turn is a wholly owned subsidiary of ST Microelectronics NV, Netherlands. ST Microelectronics Pvt. Ltd. is into the business of Integrated Circuit Design, CAD Tools and software development for its overseas group concerns. It also provides marketing support services to a group company and software development services related to design implementation and maintenance with respect to Integrated Circuits as required by guidelines/instructions. During the year under assessment, the taxpayer entered into various transactions with its Associated Enterprises. In order to benchmark its international transactions qua provision of software development services and qua provision of marketing support services ST Microelectronics used Transactional Net Margin Method (TNMM) with Operating Profit/Operating Cost as the Profit Level Indicator (PLI) being the Most Appropriate Method (MAM), computed its own margin at 11.11% as against weighted average arithmetic mean margin of 19 comparables at 11.31% and found its international transactions at arm’s ... Read more
Zimbabwe vs LCF Zimbabwe LTD, March 2020, Special Court for Income Tax Appeals, Case No. HH 227-20

Zimbabwe vs LCF Zimbabwe LTD, March 2020, Special Court for Income Tax Appeals, Case No. HH 227-20

LCF Zimbabwe LTD manufactures cement and similar products from limestone extracted at a mine in Zimbabwe. It also manufactures adhesives and adhesive paints and decorative paints, construction chemicals and agricultural lime. It is a wholly owned subsidiary of a large European group, which manufactures and sells building and construction materials. The issues in this case concerned tax deductibility of “master branding fees”, consumable spare parts not utilised at the tax year end, quarry overburden expenses and computer software. Furthermore there were also the question of levying penalties. Judgement of the Tax Court The Court decided in favour of the tax authorities. Excerpts: “The corollary to the finding of indivisibility is that the disallowance by the Commissioner of the 1.5% master branding fees of US$ 863 252.70 in the 2012 tax year and US$ 1 140 000 in the 2013 tax year was correct while the split of the 2% rate in respect of the first franchise agreement was wrong. I ... Read more
Czech Republic vs. AZETKO s.r.o., September 2019, Supreme Court, No. 5 Afs 341/2017 - 47

Czech Republic vs. AZETKO s.r.o., September 2019, Supreme Court, No. 5 Afs 341/2017 – 47

The tax authorities of the Czech Republic issued an assessment of additional income taxes and penalties for FY 2010 and 2011, because AZETKO s.r.o. according to the tax authorities did not receive an arm’s length remuneration for administration and operation of a website and e-shop on behalf on a related party, Quantus Consulting s.r.o. AZETKO disagreed with the assessment and brought the case to court. The regional court ruled in favor of AZETKO, but the tax administration appealed the decision to the Supreme Administrative Court. Judgement of the Supreme Court The Supreme Court found the tax administrations change in pricing method under the appeal of the case unsubstantiated. The tax administration had originally applied the CUP method, but in the appeal proceedings instead used the net margin transaction method (TNMM). On that basis, the appeal was dismissed by the Court. The conditions for application of the transfer pricing provisions in Section 23(7) of the Czech Income Tax Act was summarised ... Read more
Austria vs. "Sports Data GmbH", November 2018, Bundesfinanzgericht, Case No RV/2100386/2017

Austria vs. “Sports Data GmbH”, November 2018, Bundesfinanzgericht, Case No RV/2100386/2017

A GmbH (“Sport Data GmbH”) was founded in 2006 as a wholly-owned subsidiary of A Holding AG, which had been founded shortly before and had its registered office in Switzerland. A AG, Switzerland was also founded as a sister company of A GmbH. A AG is A GmbH´s only customer. The business of A GmbH is the development and support of software for A AG, the maintenance of hardware, the training of employees and the forwarding of information. A AG, Switzerland sells the information provided by A GmbH. For these services A GmbH receives a remuneration from A AG determined as actual costs plus a profit surcharge of 5 %. The tax authorities noted that A AG did not initially have any active business activities. Against this background, the tax office had doubts about the arm’s length nature of the transfer prices. The tax authorities concluded, there were also no “simple services” by A GmbH for which, according to international ... Read more