Tag: Switzerland

McDonald’s has agreed to pay €1.25bn to settle a dispute with French authorities over excessive royalty payments to Luxembourg

McDonald’s has agreed to pay €1.25bn to settle a dispute with French authorities over excessive royalty payments to Luxembourg

On 16 June 2022 McDonald’s France entered into an settlement agreement according to which it will pay €1.245 billion in back taxes and fines to the French tax authorities. The settlement agreement resulted from investigations carried out by the French tax authorities in regards to abnormally high royalties transferred from McDonald’s France to McDonald’s Luxembourg following an intra group restructuring in 2009. McDonald’s France doubled its royalty payments from 5% to 10% of restaurant turnover, and instead of paying these royalties to McDonald’s HQ in the United States, going forward they paid them to a Swiss PE of a group company in Luxembourg, which was not taxable of the amounts. During the investigations it was discovered that McDonald’s royalty fees could vary substantially from one McDonald’s branch to the next without any justification other than tax savings for the group. This conclusion was further supported by statements of the managers of the various subsidiaries as well as documentation seized which ... Read more
Malaysia vs Keysight Technologies Malaysia, May 2022, High Court, Case No WA-144-03-2020

Malaysia vs Keysight Technologies Malaysia, May 2022, High Court, Case No WA-144-03-2020

Keysight Technologies Malaysia Sdn Bhd (KTM) was incorporated in 1998 and active as a full-fledged manufacturer of various microwave devices and test instruments in which capacity it had also developed valuable intangibles. In 2008, KTM was converted into a contract manufacturer under an agreement with Agilent Technologies International s.a.r.l. and at the same time KLM purportedly transferred its intangibles to Agilent Technologies. KTM received an amount of RM 821 million which it reported as non-taxable gains form sale of intangibles in its tax return. Following an audit the tax authorities issued a notice of assessment for FY 2008 where the sum of RM 821 million had been considered revenue in nature and thus taxable under Section 4(f) of the ITA. This resulted in a claim of RM 311 million together with a 45% penalty. According to the tax authorities the transfer of technical knowhow was not actually a sale as KTM was still using the technical knowhow in its manufacturing ... Read more
Italy vs SKECHERS USA ITALIA SRL, January 2022, Supreme Court, Case No 02908/2022

Italy vs SKECHERS USA ITALIA SRL, January 2022, Supreme Court, Case No 02908/2022

Skechers USA ITALIA SRL – a company operating in the sector of the marketing of footwear and accessories – challenged a notice of assessment, relating to FY 2004, by which, at the outcome of a tax audit, its business income was adjusted as a result of the ascertained inconsistency of the transfer prices relating to purchases of goods from the parent company (and sole shareholder) resident in Switzerland. The tax authorities had contested the uneconomic nature of the taxpayer company’s operations, given the losses recognised in various financial years, attributing the uneconomic nature to the artificial manipulation of the transfer prices of the purchases of goods and recalculating, consequently, the negative income component constituted by the aforesaid costs pursuant to Article 110, paragraph 7 of the TUIR, with the consequent non-deductibility of the same to the extent exceeding the normal value of the price of the goods in question. Skechers held that the losses did not derive from the costs ... Read more
Netherlands - Crop Tax Advisers, January 2022, Court of Appeal, Case No. 200.192.332/01, ECLI:NL:GHARL:2022:343

Netherlands – Crop Tax Advisers, January 2022, Court of Appeal, Case No. 200.192.332/01, ECLI:NL:GHARL:2022:343

The question at issue was whether a Crop tax adviser had acted in accordance with the requirements of a reasonably competent and reasonably acting adviser when advising on the so-called royalty routing and its implementation. Judgement of the Court of Appeal “Crop is liable for the damages arising from the shortcoming. For the assessment of that damage, the case must be referred to the Statement of Damages, as the District Court has already decided. To answer the question of whether the likelihood of damage resulting from the shortcomings is plausible, a comparison must be made between the current situation and the situation in which business rates would have been applied. For the hypothetical situation, the rates to be recommended by the expert should be used. For the current situation, the Tax Authorities have agreed to adjusted pricing. The question whether and to what extent [the respondents] et al. can be blamed for insufficiently limiting their loss in the negotiations with ... Read more
Swiss UBS bank to pay € 1,8 billion fine for "facilitation of tax evasion and money laundering"

Swiss UBS bank to pay € 1,8 billion fine for “facilitation of tax evasion and money laundering”

The appeal court in Paris has confirmed that the Swiss UBS banking group is guilty of having facilitated tax evasion and money laundering in France, and on that basis the banking group was issued a €5,625 million fine plus confiscation of €1 billion and damages in the sum of €800 millions. Read the December 2021 judgement here ... Read more
France vs SAS Microchip Technology Rousset, December 2021, CAA of MARSEILLE, Case No. 19MA04336

France vs SAS Microchip Technology Rousset, December 2021, CAA of MARSEILLE, Case No. 19MA04336

SAS Microchip Technology Rousset (former SAS Atmel Rousset) is a French subsidiary of the American Atmel group, which designs, manufactures, develops and sells a wide range of semiconductor integrated circuits. It was subject to an audit covering the FY 2010 and 2011 and as a result of this audit, the tax authorities imposed additional corporate income tax and an additional assessments for VAT. The administration also subjected SAS Atmel Rousset to withholding tax due to income deemed to be distributed to one of the Atmel group companies. The authorities invoked the provisions of Article 57 of the General Tax Code as the new legal basis for the additional corporate tax contributions and the social contribution on corporate tax, resulting from the reintegration of the capital loss arising from the sale of SAS Fabco shares and the assumption of responsibility for SAS Fabco’s social plan, instead of the provisions of Article 38(1) and Article 39(1) of the same code. The tax ... Read more
France vs UBS AG and UBS SA, December 2021, CAA of Paris, Dossier No. 19/05566 Arrét No. 192/21

France vs UBS AG and UBS SA, December 2021, CAA of Paris, Dossier No. 19/05566 Arrét No. 192/21

Swiss banking group, UBS, had set up a system aimed at facilitating tax evasion and money laundering of wealthy French taxpayers. Judgement of the Court of Appeal By judgment of the Paris Court of Appeal dated 13 December 2021, the Swiss parent, UBS AG, was found guilty of banking and financial canvassing and of facilitating tax evasion and money laundering. The Court Sentenced UBS AG to a fine of €3,750,000.00 and confiscation of €1,000,000,000.00. Furthermore UBS AG was ordered to pay €800,000,000.00 for damages to the French State. UBS FRANCE SA, the French subsidiary, was found guilty of complicity in banking and financial canvassing and sentenced to a fine of €1,875,000.00. Click here for English translation France vs UBS Dec 2021 ... Read more
US vs Whirlpool, December 2021, U.S. Court of Appeals, Case No. Nos. 20-1899/1900

US vs Whirlpool, December 2021, U.S. Court of Appeals, Case No. Nos. 20-1899/1900

The US tax authorities had increased Whirlpool US’s taxable because income allocated to Whirlpool Luxembourg for selling appliances was considered taxable foreign base company sales income FBCSI/CFC income to the parent company in the U.S. under “the manufacturing branch rule” under US tax code Section 951(a). The income from sales of appliances had been allocated to Whirlpool Luxembourg  through a manufacturing and distribution arrangement under which it was the nominal manufacturer of household appliances made in Mexico, that were then sold to Whirlpool US and to Whirlpool Mexico. According to the arrangement the income allocated to Luxembourg was not taxable in Mexico nor in Luxembourg. Whirlpool challenged IRS’s assessment and brought the case to the US Tax Court. In May 2020 the Tax Court ruled in favor of the IRS. “If Whirlpool Luxembourg had conducted its manufacturing operations in Mexico through a separate entity, its sales income would plainly have been FCBSI [foreign base company sales income] under section 954(d)(1),”. The ... Read more
Pandora Papers - a new leak of financial records

Pandora Papers – a new leak of financial records

A new huge leak of financial records revealed by ICIJ, once again shows widespread use of offshore accounts, shell companies and trusts to hide wealth and/or avoid taxes. The new leak is known as the Pandora Papers and follows other recent leaks – lux leak, panama papers, paradise papers. The International Consortium of Investigative Journalists obtained 11.9 million confidential documents from 14 separate legal and financial services firms, which the group said offered “a sweeping look at an industry that helps the world’s ultrawealthy, powerful government officials and other elites conceal trillions of dollars from tax authorities, prosecutors and others.” “The key players in the system include elite institutions – multinational banks, law firms and accounting practices – headquartered in the U.S. and Europe.” The Consortium said the 2.94 terabytes of financial and legal data shows the “offshore money machine operates in every corner of the planet, including the world’s largest democracies,” and involves some of the world’s most well-known ... Read more
Ukrain vs PJSP Gals-K, July 2021, Supreme Administrative Court, Case No 620/1767/19

Ukrain vs PJSP Gals-K, July 2021, Supreme Administrative Court, Case No 620/1767/19

Ukrainian company “PJSP Gals-K” had been involved in various controlled transactions – complex technological drilling services; sale of crude oil; transfer of fixed assets etc. The tax authority found, that prices had not been determined in accordance with the arm’s length principle and issued a tax assessment. Gals-K disagreed and filed a complaint. The Administrative Court dismissed the tax assessment and this decision was later upheld by the Administrative Court of Appeal. Judgement of the Supreme Administrative Court The Supreme Court set aside the decisions of the Court of Appeal and remanded the case to the court of first instance for a new hearing. The court considered that breaches of procedural and substantive law by both the Court of Appeal and the Court of First Instance have been committed, and the case should therefore be referred to the Court of First Instance for a new hearing. Excerpts “Thus, in order to properly resolve the dispute in this part, the courts ... Read more
France vs. SARL Cosi Immobilier, April 2021, CAA de LYON, Case No. 19LY00527

France vs. SARL Cosi Immobilier, April 2021, CAA de LYON, Case No. 19LY00527

SARL Cosi Immobilier, is a wholly owned subsidiary of the Swiss company Compagnie de Services Immobiliers SA (Cosi SA). The group is engaged in sale of properties and real estate. Following a tax audit covering the FY 2011 and 2012, an assessment of additional corporate income tax was issued, together with penalties. According to the tax authorities service fees paid by SARL Cosi to its Swiss parent (50% of the the sales commission received) for online marketing of properties and real estates located in France had not been at arm’s length. The company requested the administrative court of Lyon to discharge the assessments, but this request was rejected by the court in a judgement issued 11 December 2018. This decision was then appealed by the company to the Supreme Administrative Court. Judgement of the Supreme Administrative Court The Appeal of Cosi Immobilier was rejected by the Court. Excerpts “In the present case, the company Cosi Immobilier concluded on 17 August ... Read more
Norway vs New Wave Norway AS, March 2021, Court of Appeal, Case No LB-2020-10664

Norway vs New Wave Norway AS, March 2021, Court of Appeal, Case No LB-2020-10664

New Wave Norway AS is a wholly owned subsidiary of the Swedish New Wave Group AB. The group operates in the wholesale market for sports and workwear and gift and promotional items. It owns trademark rights to several well-known brands. The sales companies – including New Wave Norway AS – pay a concept fee to New Wave Group AB, which passes on the fee to the concept-owning companies in the Group. All trademark rights owned by the group are located in a separate company, New Wave Group Licensing SA, domiciled in Switzerland. For the use of the trademarks, the sales companies pay royalties to this company. There is also a separate company that handles purchasing and negotiations with the Asian producers, New Wave Group SA, also based in Switzerland. For the purchasing services from this company, the sales companies pay a purchasing fee (“sourcing fee”). Both the payment of royalties and the purchase fee are further regulated in the group’s ... Read more
Canada vs Dow Chemical Canada ULC. Dec 2020, Tax Court, Case No. 2020 TCC 139

Canada vs Dow Chemical Canada ULC. Dec 2020, Tax Court, Case No. 2020 TCC 139

This decision is about the jurisdiction of the Tax Court of Canada, or perhaps more accurately about the scope of an appeal of an assessment. It arises in the context of an appeal by Dow Chemical Canada ULC of a reassessment of its 2006 taxation year. The reassessment increased Dow Chemical’s income under the transfer pricing provisions in section 247 of the Income Tax Act. In reassessing Dow Chemical for its 2006 and 2007 taxation years, the tax authorities had increased Dow Chemical’s income in respect of certain transactions with non-residents to which Dow Chemical is related. The authorities initially indicated that the transfer pricing provisions also would result in a downward adjustment to Dow Chemical’s income in those taxation years in respect of another transaction. However, the most recent reassessment of Dow Chemical’s 2006 taxation year did not reflect the downward adjustment, although the reassessment of its 2007 taxation year did. Dow Chemical has appealed the 2006 reassessment. The ... Read more
Denmark vs. Software A/S, September 2020, Tax Court, Case no SKM2020.387.LSR

Denmark vs. Software A/S, September 2020, Tax Court, Case no SKM2020.387.LSR

Software A/S was a fully fledged Danish distributor of software an related services up until 2010 where the company was converted into a commissionaire dealing on behalf of a newly established sales and marketing hub in Switzerland. Following an audit, the Danish tax authorities issued a assessment where additional taxable income from the transfer of intangibles to Switzerland in 2010 had been determined by application of the DCF valuation model. As no transfer pricing documentation had been prepared on the transfer, the assessment was issued on a discretionary basis. Software A/S filed a complaint to the Danish Tax Court. The Tax Court found that the tax authorities did not have the authority to make a discretionary assessment. It was emphasized that the company in its transfer pricing documentation had described the relevant circumstances for the restructuring. Furthermore, the company had analyzed functions and risks and prepared comparability analyzes for transactions before and after the restructuring. However, the Tax Court found ... Read more
Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

The tax authorities had issued an assessment according to which royalty payments from Colgate Palmolive España S.A (CP España) to Switzerland were not considered exempt from withholding taxes under the Spanish-Swiss DTA since the company in Switzerland was not the Beneficial Owner of the royalty-income. The assessment was set aside by the National Court in a decision issued in November 2018. The Supreme court were to clarify the conformity with the law of the judgement of the Audiencia Nacional, following in the wake of the order of admission which, in a similar manner to that proposed in appeal no. 5448/2018, ruled in favour of the taxpayer on 3 February last, asks the following questions. a) to clarify the objective and temporal limits of the so-called dynamic interpretation of the DTAs signed by the Kingdom of Spain on the basis of the OECD Model Convention – as in this case the Spanish-Swiss DTA – when, despite the fact that the concept ... Read more
Denmark vs. Adecco A/S, June 2020, Supreme Court, Case No SKM2020.303.HR

Denmark vs. Adecco A/S, June 2020, Supreme Court, Case No SKM2020.303.HR

The question in this case was whether royalty payments from a loss making Danish subsidiary Adecco A/S (H1 A/S in the decision) to its Swiss parent company Adecco SA (G1 SA in the decision – an international provider of temporary and permanent employment services active throughout the entire range of sectors in Europe, the Americas, the Middle East and Asia – for use of trademarks and trade names, knowhow, international network intangibles, and business concept were deductible expenses for tax purposes or not. In  2013, the Danish tax authorities (SKAT) had amended Adecco A/S’s taxable income for the years 2006-2009 by a total of DKK 82 million. Adecco A/S submitted that the company’s royalty payments were operating expenses deductible under section 6 (a) of the State Tax Act and that it was entitled to tax deductions for royalty payments of 1.5% of the company’s turnover in the first half of 2006 and 2% up to and including 2009, as these ... Read more
US vs Whirlpool, May 2020, US tax court, Case No. 13986-17

US vs Whirlpool, May 2020, US tax court, Case No. 13986-17

The US tax authorities had increased Whirlpool US’s taxable because income allocated to Whirlpool Luxembourg for selling appliances was considered taxable foreign base company sales income/CFC income to the parent company in the U.S. under “the manufacturing branch rule” under US tax code Section 951(a). The income from sales of appliances had been allocated to Whirlpool Luxembourg  through a manufacturing and distribution arrangement under which it was the nominal manufacturer of household appliances made in Mexico, that were then sold to Whirlpool US and to Whirlpool Mexico. According to the arrangement the income allocated to Luxembourg was not taxable in Mexico nor in Luxembourg. Whirlpool challenged IRS’s assessment and brought the case to the US Tax Court. The tax court ruled in favor of the IRS. “If Whirlpool Luxembourg had conducted its manufacturing operations in Mexico through a separate entity, its sales income would plainly have been FCBSI [foreign base company sales income] under section 954(d)(1),”. The income should therefore be ... Read more
Netherlands vs Zinc Smelter B.V., March 2020, Court of Appeal, Case No ECLI:NL:GHSHE:2020:968

Netherlands vs Zinc Smelter B.V., March 2020, Court of Appeal, Case No ECLI:NL:GHSHE:2020:968

A Dutch company, Zinc Smelter B.V., transferred part of it’s business to a Swiss group company in 2010. In dispute was whether the payment for the transferred activities had been set at arm’s length, and whether the cost-plus remuneration applied to the Dutch company after the business restructuring constituted an arm’s length remuneration for the remaining activities in the company. The case had previously been presented before the lower court where a decision had been issued in October 2017. After hearings in the Court of Appeal, Zinc Smelter B.V. and the Dutch tax authorities reached a settlement which was laid down in the decision. According to the agreement the profit split method was the correct method for determining the arm’s length remuneration of the Dutch company after the restructuring. Click here for English translation ECLI_NL_GHSHE_2020_968 ... Read more
Australia vs BHP Biliton Limited, March 2020, HIGH COURT OF AUSTRALIA, Case No [2020] HCA 5

Australia vs BHP Biliton Limited, March 2020, HIGH COURT OF AUSTRALIA, Case No [2020] HCA 5

BHP Billiton Ltd, an Australian resident taxpayer, is part of a dual-listed company arrangement (“the DLC Arrangement”) with BHP Billiton Plc (“Plc”). BHP Billiton Marketing AG is a Swiss trading hub in the group which, during the relevant years, was a controlled foreign company (CFC) of BHP Billiton Ltd because BHP Billiton Ltd indirectly held 58 per cent of the shares in the Swiss trading hub. BHP Billiton Plc indirectly held the remaning 42 per cent. The Swiss trading hub purchased commodities from both BHP Billiton Ltd’s Australian subsidiaries and BHP Billiton Plc’s Australian entities and derived income from sale of these commodities into the export market. There was no dispute that BHP Billiton Marketing AG’s income from the sale of commodities purchased from BHP Billiton Ltd’s Australian subsidiaries was “tainted sales income” to be included in the assessable income of BHP Billiton Ltd under Australian CFC provisions. The question was whether sale of commodities purchased from BHP Billiton Plc’s ... Read more
Switzerland vs Swiss Investment AG, February 2020, Administrative Court Zurich, Case No SB.2018.00094 and SB.2018.00095

Switzerland vs Swiss Investment AG, February 2020, Administrative Court Zurich, Case No SB.2018.00094 and SB.2018.00095

Two Swiss investors had established a structure for the management of a private equity fund in the form of a Swiss “Investment Advisor” AG and a Jersey “Investment Mananger” Ltd. They each held 50% of the shares in the Swiss AG and 50% of the shares in the Jersey Ltd. Swiss AG and Jersey Ltd then entered an investment advisory agreement whereby the Swiss AG carried out all advisory activities on behalf of Jersey Ltd and Jersey Ltd assumed all the risk of the investments. Both investors were employed by Swiss AG and Jersey Ltd had no employees execpt two directors who each received a yearly payment of CFH 15,000. According to the investment advisory agreement Jersey Ltd would remunerate the Swiss AG with 66% of the gross fee income. The Swiss AG would carry out all relevant functions related to investment advisory and recommend to Jersey Ltd acquisition targets which the latter would then evaluate and subsequently decides on ... Read more
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