Tag: Swap

Derivative financial instrument in which two parties agree to exchange payments calculated by reference to a notional principal amount. In the classic interest rate swap agreement two parties contract to exchange interest payments based on the same amount of indebtedness of the same maturity and with the same payment dates; one party provides fixed interest rate payments in return for variable rate payments from the other party and vice versa.

UK vs. Ladbroke Group, February 2017, case nr. UT/2016/0012 & 0013

UK vs. Ladbroke Group, February 2017, case nr. UT/2016/0012 & 0013

Tax avoidance scheme. Use of total return swap over shares in subsidiary to create a deemed creditor relationship. Value of shares depressed by novating liability for large loans to subsidiary. The scheme used by Ladbroke UK involved a total return swap and a novation of loans to extract reserves. Used to achieve a “synthetic transfer” of the JBB business to LB&G. In essence, this involved extracting the surplus which had accumulated in LGI and transferring it to LB&G prior to an actual sale of the JBB business to LB&G. The normal way to extract such reserves would be by a dividend payment. The Court ruled, that it is sufficient for the application of paragraph 13 (UK GAAR) that the relevant person has an unallowable purpose. Where the unallowable purpose is to secure a tax advantage for another person, HMRC do not have to show that the other person has in fact obtained a tax advantage, if the other person has been prevented ... Continue to full case
Switzerland vs Corp, 16. Dezember 2015, Case No. SB-2015-00005

Switzerland vs Corp, 16. Dezember 2015, Case No. SB-2015-00005

A AG granted loans to group companies as part of a cash pooling system via the parent company. The Swiss tax administration found the interest insufficient, resulting in a hidden profit distribution. According to the Swiss rules and doctrine, transactions between related parties must be consistent with the arm’s length principle. For the third-party comparison, the Court relied on the long-term interest rates, even if the cash pool balances were correctly accounted for as short-term loans. The basis for the third-party comparison for the cash pool interest rate was determined to be the market interest rate measured on the 5-year SWAP rate. The Court decision was partial approval of A AG and refusal to the Tax administration. Click here for translation Swiss SB.2005.00005 ... Continue to full case
Switzerland vs DK Bank, May 2015, Federal Supreme Court, Case No BGE 141 II 447)

Switzerland vs DK Bank, May 2015, Federal Supreme Court, Case No BGE 141 II 447)

The Federal Supreme Court denied the refund of withholding taxes claimed by a Danish bank on the basis of the double tax treaty between Denmark and Switzerland due to the lack of beneficial ownership. The Danish bank entered into total return swap agreements with different clients. For hedging purposes, the Danish bank purchased a certain amount of the underlying assets (companies listed in the Swiss stock exchange) and received dividend distributions from these Swiss companies. The Federal Supreme Court was of the opinion that the Danish bank lost the right for refund of the withholding taxes on the dividends received based on the DTT-DK/CH. According to the Federal Supreme Court, the Danish Bank could not be qualified as the beneficial owner of these shares. The Federal Supreme Court denied the beneficial ownership on the grounds that the Danish bank was, in fact, obliged to transfer the dividends to the respective parties of the total return swap agreements. Click here for ... Continue to full case