Tag: Tax avoidance

New Zealand vs Frucor Suntory, September 2020, Court of appeal, Case No [2020] NZCA 383

New Zealand vs Frucor Suntory, September 2020, Court of appeal, Case No [2020] NZCA 383

Frucor Suntory (FHNZ) had deducted purported interest expenses that had arisen in the context of a tax scheme involving, among other steps, its issue of a Convertible Note to Deutsche Bank, New Zealand Branch (DBNZ), and a forward purchase of the shares DBNZ could call for under the Note by FHNZ’s Singapore based parent Danone Asia Pte Ltd (DAP). The Convertible Note had a face value of $204,421,565 and carried interest at a rate of 6.5 per cent per annum. Over its five-year life, FHNZ paid DBNZ approximately $66 million which FHNZ characterised as interest and deducted for income tax purposes. The tax authorities issued an assessment where deductions of interest expenses in the amount of $10,827,606 and $11,665,323 were disallowed in FY 2006 and 2007 under New Zealand´s general anti-avoidance rule in s BG 1 of the Income Tax Act 2004. In addition, penalties of $1,786,555 and $1,924,779 for those years were imposed. The tax authorities found that, although ... Continue to full case
UK vs Bluecrest Capital Management, July 2020, First-Tier Tribunal - Tax Chamber, Case No TC07782

UK vs Bluecrest Capital Management, July 2020, First-Tier Tribunal – Tax Chamber, Case No TC07782

In the case of BlueCrest Capital Management Cayman Limited (& others), the key issues involved partnership profit/loss allocations for mixed member partnerships and the associated anti-avoidance legislation – limitation on tax relief for interest on unallowable purpose loans and the sale of occupational income provisions. Judgement The Tribunal found that the sale of occupational income rules could apply to charge Income tax on partnership capital contributions. Although the arrangements  did have a commercial purpose (retention and incentivization of partners), they also had as a main object the avoidance or reduction of liability to pay income tax. The test for application of the occupational income rules was therefore met. UK-vs-Bluecrest-Capital-Management-TC07782-1 ... Continue to full case
Finland vs A Group, April 2020, Supreme Administrative Court, Case No. KHO:2020:35

Finland vs A Group, April 2020, Supreme Administrative Court, Case No. KHO:2020:35

In 2008, the A Group had reorganized its internal financing function so that the Group’s parent company, A Oyj, had established A Finance NV in Belgium. Thereafter, A Oyj had transferred to intra-group long-term loan receivables of approximately EUR 223,500,000 to A Finance NV. In return, A Oyj had received shares in A Finance NV. The intra-group loan receivables transferred in kind had been unsecured and the interest income on the loan receivables had been transferred to A Finance NV on the same day. A Finance NV had entered the receivables in its balance sheet as assets. In addition, A Oyj and A Finance NV had agreed that target limits would be set for the return on investment achieved by A Finance NV through its operations. A Finance NV has reimbursed A Oyj for income that has exceeded the target limit or, alternatively, invoiced A Oyj for income that falls below the target limit. Based on the functional analysis prepared ... Continue to full case
UK vs Smith & Nephew, March 2020, Court of Appeal, Case No A3/2019/0521

UK vs Smith & Nephew, March 2020, Court of Appeal, Case No A3/2019/0521

In the case of HMRC v Smith & Nephew Overseas Ltd, consideration was given to the “fairly represent” requirement in the loan relationship code. The dispute concerns each of the Smith & Nephew’s entitlement to set off foreign exchange losses against their liability to corporation tax. The exchanges loss arose as a result of Smith & Nephews changing their functional accounting currencies from sterling to US dollars on 23 December 2008 at a time when the only asset on their balance sheets was a very substantial inter-company debt owed to them by their parent company. The debts were denominated in sterling but then had to be converted into dollars when the companies’ accounts were restated in dollars. The next day, the debts were disposed of as part of a group restructuring. The exchange losses arose from Smith & Nephew’s ‘loan relationships’ as that term is used in Chapter 2 of Part IV of the Finance Act 1996 (‘Chapter 2’). Section ... Continue to full case
Japan vs. Universal Music Corp, June 2019, Tokyo District Court, Case No 平成27(行ウ)468

Japan vs. Universal Music Corp, June 2019, Tokyo District Court, Case No 平成27(行ウ)468

An intercompany loan in the form of a so-called international debt pushdown had been issued to Universal Music Japan to acquire the shares of another Japanese group company. The tax authority found that the loan transaction had been entered for the principal purpose of reducing the tax burden in Japan and issued an assessment where deductions of the interest payments on the loan had been disallowed for tax purposes. Decision of the Court The Tokyo District Court decided in favour of Universal Music Japan and set aside the assessment. The Court held that the loan did not have the principle purpose of reducing taxes because the overall restructuring was conducted for valid business purposes. Therefore, the tax authorities could not invoke the Japanese anti-avoidance provisions to deny the interest deductions. The case is now pending at the Tokyo High Court awaiting a final decision. Click here for English Translation Jap UM 2019 ... Continue to full case
New Zealand vs Cullen Group Limited, March 2019, New Zealand High Court, Case No [2019] NZHC 404

New Zealand vs Cullen Group Limited, March 2019, New Zealand High Court, Case No [2019] NZHC 404

In moving to the United Kingdom, a New Zealand citizen, Mr. Eric Watson, restructured a significant shareholding into debt owed by a New Zealand company, Cullen Group Ltd, to two Cayman Island conduit companies, all of which he still controlled to a high degree. This allowed Cullen Group Ltd to pay an Approved Issuer Levy (AIL) totalling $8 million, rather than Non-Resident Withholding Tax of $59.5 million. The steps in the arrangement were as follows: (a) Mr Watson sold his shares in Cullen Investments Ltd to Cullen Group, at a (rounded) value of $193 million, being $291 million less his previous $98 million shareholder advances. The sale was conditional on Cullen Investments Ltd selling its shares in Medical Holdings Ltd to Mr Watson and on Cullen Investments Ltd selling its shares in Vonelle Holdings Ltd to Maintenance Ltd which was owned by Mr Watson. (b) Cullen Group’s purchase of the Cullen Investments Ltd shares from Mr Watson was funded by a vendor loan from Mr Watson of ... Continue to full case
Denmark vs T and Y Denmark, February 2019, European Court of Justice, Cases C-116/16 and C-117/16

Denmark vs T and Y Denmark, February 2019, European Court of Justice, Cases C-116/16 and C-117/16

The cases of T Danmark (C-116/16) and Y Denmark Aps (C-117/16) adresses questions related to interpretation of the EU-Parent-Subsidary-Directive The issue is withholding taxes levied by the Danish tax authorities in situations where dividend payments are made to conduit companies located in treaty countries but were the beneficial owners of these payments are located in non-treaty countries. During the proceedings in the Danish court system the European Court of Justice was asked a number of questions related to the conditions under which exemption from withholding tax can be denied on dividend payments to related parties. The European Court of Justice has now answered these questions in favor of the Danish Tax Ministry; Benefits granted under the Parent-Subsidiary Directive can be denied where fraudulent or abusive tax avoidance is involved. Quotations from cases C-116/16 and C-117/16: “The general principle of EU law that EU law cannot be relied on for abusive or fraudulent ends must be interpreted as meaning that, where ... Continue to full case
Denmark vs N, X, C, and Z Denmark, February 2019, European Court of Justice, Cases C-115/16, C-118/16, C-119/16 and C-299/16

Denmark vs N, X, C, and Z Denmark, February 2019, European Court of Justice, Cases C-115/16, C-118/16, C-119/16 and C-299/16

The cases of N Luxembourg 1 (C-115/16), X Denmark A/S (C-118/16), C Danmark I (C-119/16) and Z Denmark ApS (C-299/16), adresses questions related to the interpretation of the EU Interest and Royalty Directive. The issue in these cases is withholding taxes levied by the Danish tax authorities in situations where interest payments are made to conduit companies located in treaty countries but were the beneficial owners of these payments are located in non-treaty countries. During the proceedings in the Danish court system the European Court of Justice was asked a number of questions related to the conditions under which exemption from withholding tax can be denied on interest payments to related parties. The European Court of Justice has now answered these questions in favor of the Danish Tax Ministry; Benefits granted under the Interest and Royalty Directive can be denied where fraudulent or abusive tax avoidance is involved. Quotations from cases C-115/16, C-118/16, C-119/16 and C-299/16: “The concept of ‘beneficial ... Continue to full case
Italy vs Dolce & Gabbana, December 2018, Supreme Court, Case no 33234/2018

Italy vs Dolce & Gabbana, December 2018, Supreme Court, Case no 33234/2018

In this case the Italian fashion group, Dolce & Gabbana, had moved ownership of valuable intangibles to a subsidiary established for that purpose in Luxembourg. The Italian Revenue Agency found the arrangement to be wholly artificial and set up only to avoid Italien taxes and to benefit from the privileged tax treatment in Luxembourg. The Revenue Agency argued that all decision related to the intangibles was in fact taken at the Italian headquarters of Dolce & Gabbana in Milan, and not in Luxembourg, where there were no administrative structure and only one employee with mere secretarial duties. Dolce & Gobbana disargeed with these findings and brought the case to court. In the first and second instance the courts ruled in favor of the Italian Revenue Agency, but the Italian Supreme Court ruled in favor of Dolce & Gabbana. According to the Supreme Court, the fact that a company is established in another EU Member State to benefit from more advantageous ... Continue to full case
New Zealand vs Frucor Suntory, November 2018, High Court, Case No NZHC 2860

New Zealand vs Frucor Suntory, November 2018, High Court, Case No NZHC 2860

This case concerns application of the general anti-avoidance rule in s BG 1 of the Income Tax Act 2004. The tax authorities issued an assessment where deductions of $10,827,606 and $11,665,323 were disallowed in the 2006 and 2007 income tax years respectively. In addition, penalties of $1,786,555 and $1,924,779 for those years were imposed. The claimed deductions arose in the context of an arrangement entered into by Frucor Holdings Ltd (FHNZ) involving, among other steps, its issue of a Convertible Note to Deutsche Bank, New Zealand Branch (DBNZ) and a forward purchase of the shares DBNZ could call for under the Note by FHNZ’s Singapore based parent Danone Asia Pte Ltd (DAP). The Note had a face value of $204,421,5654 and carried interest at a rate of 6.5 per cent per annum. Over its five-year life, FHNZ paid DBNZ approximately $66 million which FHNZ characterised as interest and deducted for income tax purposes. The tax authorities said that, although such ... Continue to full case
Pharma and Tax Avoidance, Report from Oxfam

Pharma and Tax Avoidance, Report from Oxfam

New Oxfam research shows that four pharmaceutical corporations — Abbott, Johnson & Johnson, Merck, and Pfizer — systematically allocate super profits in overseas tax havens. In eight advanced economies, pharmaceutical profits averaged 7 percent, while in seven developing countries they averaged 5 percent. In comparison, profits margins averaged 31 percent in countries with low or no corporate tax rates – Belgium, Ireland, Netherlands and Singapore. The report exposes how pharmaceutical corporations uses sophisticated tax planning to avoid taxes. cr-prescription-for-poverty-pharma-180918-en ... Continue to full case
Canada vs Loblaw Companies Ltd., September 2018, Canadian tax court, Case No 2018 TCC 182

Canada vs Loblaw Companies Ltd., September 2018, Canadian tax court, Case No 2018 TCC 182

The Canada Revenue Agency had issued a reassessments related to Loblaw’s Barbadian banking subsidiary, Glenhuron, for tax years 2001 – 2010. The tax authorities had determined that Glenhuron did not meet the requirements to be considered a foreign bank under Canadian law, and therefore was not exempt from paying Canadian taxes. “Loblaw took steps to make Glenhuron look like a bank in order to avoid paying tax. Government lawyers said Glenhuron did not qualify because, among other things, it largely invested the grocery giant’s own funds and was “playing with its own money.“ Tax Court found the transactions entered into by Loblaw regarding Glenhuron did result in a tax benefit but “were entered primarily for purposes other than to obtain the tax benefit and consequently were not avoidance transactions.” The Tax Court concludes as follows: “I do not see any extending the scope of paragraph 95(2)(l) of the Act. No, had there been any avoidance transactions the Appellant would not ... Continue to full case
Tax avoidance in Australia

Tax avoidance in Australia

In May 2018 the final report on corporate tax avoidance in Australia was published by the Australian Senate. The report contains the findings, conclusions and recommendations based on 4 years of hearings and investigations into tax avoidance practices by multinationals in Australia. Australian-final-report-on-tax-avoidance ... Continue to full case
Zimbabwe vs CRS (Pvt) Ltd, October 2017, High Court, HH 728-17 FA 20/2014

Zimbabwe vs CRS (Pvt) Ltd, October 2017, High Court, HH 728-17 FA 20/2014

The issue in this case was whether tax administration could tax a “non-existent income” through the “deeming provisions” of s 98 of Zimbabwe’s Income Tax Act. A lease agreement and a separate logistical agreement had been entered by CRS Ltd and a related South African company, for the lease of its mechanical trucks, trailers and tankers for a fixed rental. The tax payer contended that the rentals in the agreements were fair and reasonable. The tax administration contended that they were outrageously low so as to constitute under invoicing and tax avoidance. The court ruled in favor of the tax administration. Excerps from the Judgement: “Where any transaction, operation or scheme (including a transaction, operation or scheme involving the alienation of property) has been entered into or carried out, which has the effect of avoiding or postponing liability for any tax or of reducing the amount of such liability, and which in the opinion of the Commissioner, having regard to the circumstances ... Continue to full case
Canada vs Univar Holdco, October 2017, Federal Court of Appeal, Case No 2017 FCA 207

Canada vs Univar Holdco, October 2017, Federal Court of Appeal, Case No 2017 FCA 207

In the case of Univar Holdco the Canadian tax authorities had applied Canadian Anti-Avoidance Rules to a serie of transactions undertaken by the Univar Group following the acquisition of the group’s Dutch parent. The (only) purpose of these transactions was to increase the amount of retained earnings that could be taken out of Canada without incurring withholding tax. The Federal Court of Appeal overturned the prior decision of the Tax Court and came to the conclusion that it had not been proved that the transactions were abusive tax avoidance – abuse of the Act. The Court also noted that subsequent amendments and commentary to the Act do not confirm that transactions caught by the subsequent amendments are abusive before the amendments are enacted. The 2017 decision of the Federal Court of Appeal Canada vs Univar Holdco 13102017 The 2016 decision of the Tax Court Canada vs Univar Holdco June 2016tcc159 ... Continue to full case
European Commission vs. Amazon and Luxembourg, October 2017, State Aid - Comissions decision, SA.38944 

European Commission vs. Amazon and Luxembourg, October 2017, State Aid – Comissions decision, SA.38944 

Luxembourg gave illegal tax benefits to Amazon worth around €250 million The European Commission has concluded that Luxembourg granted undue tax benefits to Amazon of around €250 million.  Following an in-depth investigation launched in October 2014, the Commission has concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in Luxembourg without any valid justification. The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies). In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU’s taxable profits. The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the Commission ... Continue to full case
Australian Parliament Hearings - Tax Avoidance

Australian Parliament Hearings – Tax Avoidance

In a public hearing held 22 August 2017 in Sydney Australia by the Economics References Committee, tech companies IBM, Microsoft, and Apple were called to the witnesses stand to explain about tax avoidance schemes – use of “regional headquarters” in low tax jurisdictions (Singapore, Ireland and the Netherlands) to avoid or reduce taxes. Follow the ongoing Australian hearings into corporate tax avoidance on this site: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th Transcript from the hearing: Tax Avoidance, Australian Senate Hearing, 22 August 2017 ... Continue to full case
Russia vs Uralkaliy PAO, July 2017, Moscow Arbitration Court, Case No. A40-29025/17-75-227

Russia vs Uralkaliy PAO, July 2017, Moscow Arbitration Court, Case No. A40-29025/17-75-227

A Russian company, Uralkaliy PAO, sold potassium chloride to a related trading company in Switzerland , Uralkali Trading SA. Following an audit, the Russian tax authority concluded that Uralkaliy PAO had set the prices at an artificially low level. A decision was therefore issued, ordering the taxpayer to pay an additional tax of 980 million roubles and a penalty of 3 million roubles. Uralkaly PAO had used the transactional net margin method (TNMM). The reasons given for not using the CUP method was that no publicly accessible sources of information on comparable transactions between independent parties existed. The range of return on sales for 2012 under the TNMM was 1.83% – 5.59%, while Uralkali Trading SA’s actual profit margin was 1.81%. The court supported the taxpayer’s choice of pricing method (TNMM), and since the Swiss trader’s actual profit margin did not exceed the upper limit of the range, it was concluded that the controlled transactions were priced at arm’s length.  The court rejected ... Continue to full case
South Africa vs Sasol, 30 June 2017, Tax Court, Case No. TC-2017-06 - TCIT 13065

South Africa vs Sasol, 30 June 2017, Tax Court, Case No. TC-2017-06 – TCIT 13065

The taxpayer is registered and incorporated in the Republic of South Africa and carries on business in the petrochemical industry. It has some of its subsidiaries in foreign jurisdictions. Business activities include the importation and refinement of crude oil. This matter concerns the analysis of supply agreements entered into between the XYZ Corp and some of its foreign subsidiaries. It thus brings to fore, inter alia the application of the South African developing fiscal legal principles, namely, residence based taxation, section 9D of the Income Tax Act 58 of 1962 and other established principles of tax law, such as anti-tax avoidance provisions and substance over form. Tax avoidance is the use of legal methods to modify taxpayer’s financial situation to reduce the amount of tax that is payable SARS’s ground of assessment is that the XYZ Group structure constituted a transaction, operation or scheme as contemplated in section 103(1) of the Act. The structure had the effect of avoiding liability ... Continue to full case
Google paid 306 million Euro in an Italian tax settlement

Google paid 306 million Euro in an Italian tax settlement

Google has agreed to pay 306 million Euro to the Italian authorities in a transfer pricing dispute related to years 2009 – 2013. The dispute was one of several initiated due to the billions of dollars in sales to European consumers and Googles lack of tax payments in Europe. Google has already settled with the UK, paying 130 million in back taxes in 2016 to end an long lasting audit. Other disputes still remain elsewhere in Europe. The settlement follows an agreement reached in 2015, where Apple paid 300 million Euro to the Italian tax authorities. aggressive tax avoidance ... Continue to full case