Tag: Switzerland

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 ... Continue to full case
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 ... Continue to full case
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 ... Continue to full case
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 ... Continue to full case
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 translation ECLI_NL_GHSHE_2020_968 ... Continue to full case
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 ... Continue to full case
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 ... Continue to full case
Uruguay vs Nestlé del Uruguay S.A., December 2019, Tribunal de lo Contencioso Administrativo, Case No 786/2019

Uruguay vs Nestlé del Uruguay S.A., December 2019, Tribunal de lo Contencioso Administrativo, Case No 786/2019

Nestlé del Uruguay S.A. had deducted royalty payments to its parent company located in Switzerland for the right to use certain local brands such as Águila, El Chaná, Vascolet, Bracafé and Copacabana. Royalties were calculated as 5% of sales, with the exception of payments for the Águila brand products, where royalties were calculated as 2% of sales. The tax administration (DGI) found that the royalty payments had not been at arm’s length. In defense of this position, it was argued that these local brands had been developed by Nestlé Uruguay itself, and then transferred to Nestlé Switzerland in 1999 for a sum of USD 1. Nestle Uruguay disagreed and argued that the tax administration was applying transfer pricing rules retroactively to a transaction concluded in 1999, when such rules did not yet exist. Judgement of the Court The Court considered that the Nestlé Uruguay should not pay 5% in royalties for the right to use trademarks it had developed itself ... Continue to full case
Netherlands vs. Swiss Corp, November 2019, Rechtbank Noord-Nederland, Case No. 2019:1492

Netherlands vs. Swiss Corp, November 2019, Rechtbank Noord-Nederland, Case No. 2019:1492

For the purpose of determining whether a Swiss Corporation had effektivly been managed from the Netherlands or had a permanent establishment in the Netherlands, the Dutch tax authorities send a request for information. The Swiss Corp was not willing to answere the request and argued that the request was disproportionate and that the concepts of “documents concerning decision-making with regard to important decisions” and “e-mail files” was and did not fit into the powers that an inspector has under Article 47 of the AWR. The court ruled in favor of the tax authorities. The court did not find the tax authorities’ request for information disproportionate. Article 47 of the Awr requires the provision of factual information and information that may be relevant to taxation with respect to the taxpayer (cf. Supreme Court October 20, 2017, ECLI: NL: HR: 2017: 2654). In the opinion of the court, the defendant remained within those limits with his request to claimant to provide access ... Continue to full case
Russia vs PJSC Uralkali, November 2019, Supreme Court Review Panel, Case No. А40-29025/2017

Russia vs PJSC Uralkali, November 2019, Supreme Court Review Panel, Case No. А40-29025/2017

PJSC Uralkali, produced and sold fertilizers (“potassium chloride”) through a related Swiss trader. Uralkali had informed the authorities about the controlled transaction and submitted the required TP documentation. To substantiate the pricing of the transaction they had applied the transactional net margin method (TNMM) with the Swiss trader as the tested party. The Russian tax authorities disapproved of the choice of method and the way the method had been applied. They conducted an analysis, using the CUP method, and determined the the prices used in the controlled transaction deviated from price quotations of an independent pricing agency (Argus). Hence a tax assessment was issued. PJSC Uralkali disapproved of the assessment and brought the case to court. The court of first instance supported Uralkali’s position, and argued that the tax authority should have applied the same TP method as the Taxpayer. Failure of the tax authority to apply the same TP method or to provide sufficient evidence to justify use of ... Continue to full case
Denmark vs Adecco A/S, Oct 2019, High Court, Case No SKM2019.537.OLR

Denmark vs Adecco A/S, Oct 2019, High Court, Case No SKM2019.537.OLR

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. “Section 2 of the Tax Assessment Act. Paragraph 1 states that, when calculating the taxable income, group affiliates must apply prices and terms for commercial or economic transactions in accordance with what could have been agreed if the transactions had been concluded between independent parties. SKAT does not consider it in accordance with section ... Continue to full case
The Kering Group - owner of Gucci, Bottega Veneta, Saint Laurent and Pomellato - has settled an Italian Tax Case for an Amount of 1.250 Billion Euro

The Kering Group – owner of Gucci, Bottega Veneta, Saint Laurent and Pomellato – has settled an Italian Tax Case for an Amount of 1.250 Billion Euro

The Kering group – owner of Gucci, Bottega Veneta, Saint Laurent and Pomellato –  has settled a case with the Italian tax agency for an amount of euro 1.250 billion in taxes and penalties relating to fiscal years 2011-2017. The case was started by the Italian tax police in 2017 and resulted in a recommendation to charge the president and chief executive officer of the Italian company Guccio Gucci S.p.A. with the crimes of tax evasion and failure to file Italian income tax return. Guccio Gucci S.p.A., the Italian operating company of the group and owner of the GUCCI brand, had licensed the brand to a Swiss affiliate company, Luxury Goods International S.A., together with the rights to exploit and manage the brand for the purpose of the global marketing, commercialization and sale of GUCCI products in Italy and worldwide. However, most of the marketing activities for the distribution and sale of the GUCCI products actually took place at the ... Continue to full case
Italy vs Christian Fishbacher S.p.A, May 2019, Corte di Cassazione No 9615 Anno 2019

Italy vs Christian Fishbacher S.p.A, May 2019, Corte di Cassazione No 9615 Anno 2019

According to the Tax Authorities, the content of Christian Fishbacher S.p.A’s contract with the Swiss parent of the Group, granting limited right of use of the trademark, did not justify a royalty of 3.5%, to which an additional 1.6% was added as a contribution to the investments for the promotion and development of the brand. The appellate judge held that exceeding the values taken as “normal” by the circular 32 of 09/22/1980 not it were justified in the light of the concrete elements of the case is that correctly the Office had re-determined the value of the services within 2%, following the aforementioned Circular, which incorporated the indications of the report drawn up by the OECD in 1979. The circular identifies three levels for assessing the normal value of royalties: the first, not suspected, up to 2%; the second from 2% to 5%, determined on the basis of technical data firm and to the content of the contract , in ... Continue to full case
Russia vs PJSC Uralkali, April 2019, Court of Appeal, Case No. А40-29025/2017

Russia vs PJSC Uralkali, April 2019, Court of Appeal, Case No. А40-29025/2017

PJSC Uralkali, produced and sold fertilizers (“potassium chloride”) through a related Swiss trader. Uralkali had informed the authorities about the controlled transaction and submitted the required TP documentation. To substantiate the pricing of the transaction they had applied the transactional net margin method (TNMM) with the Swiss trader as the tested party. The Russian tax authorities disapproved of the choice of method and the way the method had been applied. They conducted an analysis, using the CUP method, and determined the the prices used in the controlled transaction deviated from price quotations of an independent pricing agency (Argus). Hence a tax assessment was issued. PJSC Uralkali disapproved of the assessment and brought the case to court. The court of first instance supported Uralkali’s position, and argued that the tax authority should have applied the same TP method as the Taxpayer. Failure of the tax authority to apply the same TP method or to provide sufficient evidence to justify use of ... Continue to full case
Mexico vs "Drink Distributor S.A.", April 2019, TRIBUNAL FEDERAL DE JUSTICIA ADMINISTRATIVA, Case No 15378/16-17-09-2/1484/18-S2-08-04

Mexico vs “Drink Distributor S.A.”, April 2019, TRIBUNAL FEDERAL DE JUSTICIA ADMINISTRATIVA, Case No 15378/16-17-09-2/1484/18-S2-08-04

“Drinks Distributor S.A.” was involved in purchase, sale and distribution of alcoholic beverages in Mexico. “Drinks Distributor s.a” had entered into a non-exclusive trademark license agreement with a related party for the sale of its product. Following a restructuring process, the related party moved to Switzerland. Following an audit the Mexican tax administration, determined that deductions for marketing and advertising costs related to brands and trademarks used under the licensing agreement, were not “strictly indispensable” and therefore not deductible, cf. requirement established by the Income Tax Law in Mexico. Drinks Distributor S.A on its side held that the marketing and advertising costs were strictly indispensable and that the tax deductions should be accepted. The dispute ended up in the Federal Court of Administrative Justice. Judgement: The Court determined what should be understood as “strictly indispensable“. To establish this concept the purposes of the specific company and the specific costs must first be determined – in particular that the costs are ... Continue to full case
Ukrain vs PJSC "Azot", March 2019, Administrative Court of Appeal, Case No 826/17841/17

Ukrain vs PJSC “Azot”, March 2019, Administrative Court of Appeal, Case No 826/17841/17

Azot is a producer of mineral fertilizers and one of the largest industrial groups in Ukraine. Following an audit the tax authorities concluded that Azot’s export of mineral fertilizers to a related party in Switzerland, NF Trading AG, had been priced significantly below the arm’s length price, and moreover that Azot’s import of natural gas from Russia via a related party in Cyprus, Ostchem Holding Limited, had been priced significantly above the arm’s length price. On that basis, an assessment of additional corporate income tax in the amount of 43 million UAH and a decrease in the negative value by 195 million UAH was issued. The Court ruled in favor of the tax authorities. Click here for translation UK v Az 2019 ... Continue to full case
European Commission vs McDonald, December 2018, European Commission Case no. SA.38945

European Commission vs McDonald, December 2018, European Commission Case no. SA.38945

The European Commission found that Luxembourg did not grant illegal State aid to McDonald’s as a consequence of the exemption of income attributed to a US branch. ...it is not established that the Luxembourg tax authorities misapplied the Luxembourg – US double taxation treaty. Therefore, on the basis of the doubts raised in the Opening Decision and taking into account its definition of the reference system, the Commission cannot establish that the contested rulings granted a selective advantage to McD Europe by misapplying the Luxembourg – US double taxation treaty ... Continue to full case
Canada vs Cameco Corp., October 2018, Tax Court of Canada, Case No 2018 TCC 195

Canada vs Cameco Corp., October 2018, Tax Court of Canada, Case No 2018 TCC 195

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
Russia vs Togliattiazot, September 2018, Russian Arbitration Court, Case No. No. А55-1621 / 2018

Russia vs Togliattiazot, September 2018, Russian Arbitration Court, Case No. No. А55-1621 / 2018

A Russian company, Togliattiazot, supplied ammonia to the external market through a Swiss trading hub, Nitrochem Distribution AG. The tax authority found that the selling price of the ammonia to Nitrochem Distribution AG had not been determined by Togliattiazot in accordance with the arm’s length principle but had been to low. Hence, a transfer pricing assessment was issued where the CUP method was applied. At first, the company argued that Togliattiazot and Nitrochem Distribution AG were not even affiliates. Later, the company argued that transfer prices had been determined in accordance with the TNM-method. The court ruled in favor of the Russian tax authority. Based on information gathered by the tax authorities – SPARK-Interfax and Orbis Bureau Van Djik bases, Switzerland’s trade register, Internet sites, and e-mail correspondence etc – the tax authorities were able to prove in court, the presence of actual control between Togliattiazot and Nitrochem. The TNMM method applied by Togliattiazot was rejected by the court because ... Continue to full case
Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

Spain vs. Zeraim Iberica SA, June 2018, Audiencia Nacional, Case No. ES:AN:2018:2856

ZERAIM IBERICA SA, a Spanish subsidiary in the Swiss Syngenta Group (that produces seeds and agrochemicals), had first been issued a tax assessment relating to fiscal years 2006 and 2007 and later another assessment for FY 2008 and 2009 related to the arm’s length price of seeds acquired from Zeraim Gedera (Israel) and thus the profitability of the distribution activities in Spain. The company held that new evidence – an advance pricing agreement (APA) between France and Switzerland – demonstrated that the comparability analysis carried out by the Spanish tax authorities suffered from significant deficiencies and resulted in at totally irrational result, intending to allocate a net operating result or net margin of 32.79% in fiscal year 2008 and 30.81% in 2009 to ZERAIM IBERICA SA when the profitability of distribution companies in the sector had average net margins of 1.59%. The tax authorities on there side argued that the best method for pricing the transactions was the Resale Price ... Continue to full case