Tag: Transfer of intangibles

France vs SA Sacla, February 2020, CAA de Lyon, Case No. 17LY04170

France vs SA Sacla, February 2020, CAA de Lyon, Case No. 17LY04170

SA Sacla, a French company trading in protective clothing and footwear, as well as small equipment, was audited for fiscal years 2007, 2008 and 2009. The French tax administration issued an assessment, considering that SA Sacla by selling brands owned by it for an amount of 90,000 euros to a Luxembourg company, Involvex, had indirectly transfered profits abroad. Due to inconclusive results of various valuations presented by the tax authorities and the taxpayer, an expert opinion was ordered by the Court on the question of whether the price of the brands sold by SA Sacla to the company Involvex had been at arm’s length. DECIDES: Article 1: Before ruling on the request of SA SACLA, an expert will carry out an assessment in order to determine whether the selling price of the brands sold by SA SACLA corresponds to their value, taking into account the exemption payment of royalties for a period of 5 years granted by the company Involvex ... Continue to full case

Israel vs Broadcom, Aug 2019, Israeli Supreme Court, Case No 2454/19

In 2012 Broadcom Corporation acquired all the shares of Broadlight Inc, another US corporation which owned a subsidiary in Israel, for around $200 million. Three months later, the subsidiary in Israel sold its IP to a group company for $59.5m and then an agreement was entered according to which the subsidiary would supply R&D, marketing and support services to the other group companies for a cost plus fee. Based on these facts the Israeli tax Authorities issued an assessment equivalent to $168.5m. The tax authorities found that the full value of the company in Israel had been transferred. The tax assessment was brought to court where Broadcom claimed that the tax authorities had re-characterised the transaction and that the onus of proof was on the tax authorities to justify the value of $168.5m. First the District Court held that all the values in the Israeli subsidiary had been transferred and ruled in favor of the tax authorities. Later in a ... Continue to full case
Facebook in billion dollar dispute with the IRS related to transfers of intangibles to Ireland

Facebook in billion dollar dispute with the IRS related to transfers of intangibles to Ireland

In the annual report for 2018 Facebook Inc. has included the following statement on current tax disputes with the IRS. “…The tax laws applicable to our business, including the laws of the United States and other jurisdictions, are subject to interpretation and certain jurisdictions are aggressively interpreting their laws in new ways in an effort to raise additional tax revenue from companies such as Facebook. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position, results of operations, and cash flows. For example, in 2016, the IRS issued us a formal assessment relating to transfer pricing with our foreign subsidiaries in conjunction with the examination of the 2010 tax year, and although we disagree with the IRS’s position and are contesting this issue, the ultimate resolution is uncertain and, if resolved in a manner unfavorable to ... Continue to full case
Blizzard Gaming involved in major Tranfer Pricing disputes

Blizzard Gaming involved in major Tranfer Pricing disputes

US Gaming Giant, Activision Blizzard Inc. – known for games such as World of Warcraft and Diablo – is and has been involved in several major transfer pricing disputes – with the US, French, UK, and Swedish tax authorities. In a 10Q filing with the US Securities and Exchange Commission from November 2018 the following information was provided by the company on pending tax cases. “Activision Blizzard’s 2009 through 2016 tax years remain open to examination by certain major taxing jurisdictions to which we are subject. During February 2018, the Company was notified by the IRS that its tax returns for 2012 through 2016 tax years will be subject to examination. In September 2018, the IRS concluded its examination of our 2009 through 2011 tax years. The Company also has several state and non-U.S. audits pending, including the French audit discussed below. In addition, as part of purchase price accounting for our 2016 acquisition of King, the Company assumed $74 ... Continue to full case

Israel vs Hewlett-Packard, July 2017, Settled in International Arbitration

Hewlett-Packard pays NIS 1.6 billion ($450 million) in tax on its 2006 acquisition of the intellectual property of Israel company Mercury Interactive, in addition to the NIS 1 billion already paid to the Israel Tax Authority. The acquisition at issue took place in two stages. First the shares in Mercury Interactive were acquired by Hewlett-Packard for $4.5 billion in 2006. Then in 2009 Mercury Interactive’s intellectual property was transferred to Hewlett-Packard for a substantially lower price of $963 million. The Tax Authority held that the sales of the intellectual property should be taxed at the full value of $4.5 billion The case was settled in international arbitration, which ended with an additional tax payment of NIS 1.6 billion by Hewlett-Packard ... Continue to full case
Israel vs. Gteko Ltd (Microsoft), June 2017, District Court

Israel vs. Gteko Ltd (Microsoft), June 2017, District Court

In November 2006 Microsoft Corp. purchased 100% of the shares of Gteko Ltd. (IT Support technology), for USD 90 million. The purchase was made with the intention of integrating Gteko’s technology into Microsoft’s own products. Following this purchase of Gteko Ltd., the employees were transferred to the local Microsoft subsidiary and a few months later another agreement was entered transferring Gteko’s intellectual property/intangibles to Microsoft. This transfer was priced at USD 26 million based on the purchase price allocation (PPA). The tax authorities of Israel found that the price of 26 mio USD used in the transaction was not at arm’s length. It was further argued, that the transaction was not only a transfer of some intangibles but rather a transfer of all assets owned by Gteko as a going concern to Microsoft Corp. The arm’s length price for the transfer was set at USD 80 million. The District Court agreed with the assessment and held that “value does not disappear or evaporate” and that Gteko had not succeeded in ... Continue to full case
Sweden vs Ferring AB, June 2011, Swedish Court, Case no 2627-09

Sweden vs Ferring AB, June 2011, Swedish Court, Case no 2627-09

In connection with a restructuring, Ferring Sweden (a Scandinavian pharmaceutical) had transferred intangible assets to a group company in Switzerland. Among the assets transferred was an exclusive worldwide license to manufacture and sell a drug and a number of ongoing R&D projects. The question in the case was whether the price agreed between the Group companies was consistent with the arm’s length principle. The Ferring’s position was that the price was consistent with the arm’s length principle, while the Swedish Tax Agency believed that an arm’s-length price was significantly higher. In support of its pricing, the company had submitted a valuation made by the audit company A, where the value of Ferring after the transfer (the residual company) was compared with the value of the company if it had continued to operate as a full-fledged company (the original company). These values ​​were determined through a present value calculation of the future cash flows in each unit. The difference in value ... Continue to full case