Tag: Transfer pricing documentation

Israel vs Kontera and Finisar, April 2018, Supreme Court, Case No. 943/16

Israel vs Kontera and Finisar, April 2018, Supreme Court, Case No. 943/16

In these two cases from Israel the Supreme Court rules on the issue of whether or not companies using the cost plus method must include stock-based compensation in the cost base. The Court concludes that stock-based compensation is an integral part of the compensation package of the Israeli subsidiaries’ employees with the objective of improving the quality of services rendered and strengthening the bond between the companies’ and employees’ cohesive goals. Therefore, such compensation should be included in the cost base. The Court also addressed the burden of proof in relation to transfer pricing disputes in Israel. Section 85 A (c) (2) provides that the burden of proof is with the tax authority if the taxpayer have submitted all required documentation, including a transfer pricing study, that “adequately substantiate” intercompany prices to be in accordance with arm’s length principle ... Continue to full case
Denmark vs. Corp, March 2017, Tax Tribunal, SKM2017.187

Denmark vs. Corp, March 2017, Tax Tribunal, SKM2017.187

The Danish Tax administration had made an estimated assessment due to a insufficient TP documentation. In the assessment goodwill amortizations were included when comparing the operating income of the company to that of independent parties in a database survey. The Tax Tribunal found that the tax administration was not entitled to make an estimated assessment under Article 3B (3) of the current Tax Control Act. 8 (now paragraph 9) and section 5 3, where the TP documentation provided a sufficient basis for assessing whether prices and terms were in accordance with the arm’s length principle. According to the Tax Tribunal goodwill amortizations should not be included when comparing the operating income of the company to the operating income of independent parties in a database survey. Hence the assessment was reduced to DKK 0. The case has been appealed to the Danish National Court by the tax authorities. Click here for translation SKM2017-187-LSR ... Continue to full case
Spain vs. Schwepps (Citresa), February 2017, Spanish Supreme Court, case nr. 293/2017

Spain vs. Schwepps (Citresa), February 2017, Spanish Supreme Court, case nr. 293/2017

The Spanish Tax administration made an income adjustment of Citresa (a Spanish subsidiary of the Schweeps Group) Corporate Income Tax for FY 2003, 2004, 2005 and 2006, resulting in a tax liability of €38.6 millon. Citresa entered into a franchise agreement and a contract manufacturing agreement with Schweppes International Limited (a related party resident in the Netherlands). The transactions between the two group companies were not found to be in accordance with the arm’s length principle. The issue under dispute was the use of TNMM introduced in Spain in 2006. The taxpayer had used the CUP method to verify the arm’s length nature of the transaction while the Spanish Tax administration found it more appropriate to use the TNMM. Prior to 1 December 2006, the Spanish Corporate Income Tax Act (CIT) established three methods of pricing related transactions (the “Comparable Uncontrolled Price Method”, the “Cost Plus Method” and the “Resale Price Method”) and if none were applicable it established the application of the “Transactional Profit Split Method” ... Continue to full case
Russia vs Dulisma Oil, January 2017, Russian Court Case No. A40-123426 / 16-140-1066

Russia vs Dulisma Oil, January 2017, Russian Court Case No. A40-123426 / 16-140-1066

This case relates to sales of crude oil from the Russian company, Dulisma Oil,  to an unrelated trading company, Concept Oil Ltd, registered in Hong Kong. The Russian tax authorities found that the price at which oil was sold deviated from quotations published by the Platts price reporting agency. They found that the prices for particular deliveries had been lower than the arm’s length price and issued a tax assessment and penalties of RUB 177 million. Dulisma Oil had set the prices using quotations published by Platts, which is a common practice in crude oil trading. The contract price was determined as the mean of average quotations for Dubai crude on publication days agreed upon by the parties, minus a differential determined before the delivery date “on the basis of the situation prevailing on the market”. Transfer pricing documentation had not been prepared, and the company also failed to explain the method by which the price had been calculated and how the price ... Continue to full case
Denmark vs. Corp, December 2016, Tax Tribunal, SKM2017.115

Denmark vs. Corp, December 2016, Tax Tribunal, SKM2017.115

The case relates to controlled transactions between a Danish company and its permanent establishment, as well as the calculation of taxable income of the permanent establishment. The Danish Tax Administration was entitled to make tax assessment in accordance with applicable Tax Law. The transfer pricing-documentation provided by the Company lacked a comparability analysis. The assessment was in line with the OECD Transfer Pricing Guidelines, but some corrections to the tax assessment were made ... Continue to full case
Denmark vs. Bombardier, October 2013, Administrative Tax Court, SKM2014.53.LSR

Denmark vs. Bombardier, October 2013, Administrative Tax Court, SKM2014.53.LSR

The issue in the case was whether the applicable rates under the cash pool arrangement were on arm’s length, i.e. in accordance with the transfer pricing requirements. The Administrative Tax Court upheld most of the conclusions of the tax authorities. First, the Court found that the tax authorities were allowed to assess an arm’s length rate due to the lack of transfer pricing documentation. Second, the financial service fee of 0.25% was upheld. Third, the Court concluded that the rate on the short-term deposits and the corresponding loans (borrowed due to insufficient liquidity management) should be the same. The Administrative Tax Court observed that there was very little or no creditor risk on these gross corresponding loans/deposits because of the possibility of offsetting the balance. Hence, according to the Court, there was no basis for a spread on the gross balance. However, the rate spread on the net balance of the deposits was lowered from +1.18% to + 1.15%, equal ... Continue to full case
Germany vs. Corp. April 2013, Supreme Tax Court judgment I R 45/11

Germany vs. Corp. April 2013, Supreme Tax Court judgment I R 45/11

The Supreme Tax Court has held that internal or other restrictions on the excise of ownership rights do not obviate an association by common shareholding of more than 25%. It has also held that the application of the transfer pricing documentation rules to cross-border transactions only is, while discriminatory, justified by the need to protect tax revenue. A German asset management subsidiary of a Luxembourg investment fund management company paid substantial fees to a Luxembourg service company. Both Luxembourg companies were wholly-owned by a Luxembourg holding company. The investment fund management company was obliged to follow the policies of the fund. These could only be revised by a two-thirds majority resolution of the investors. The German subsidiary argued that this restriction meant that its Luxembourg shareholder could not be forced to follow a common business policy with the service provider. Accordingly the two were not related parties within the meaning of the Foreign Tax Act and there was no requirement ... Continue to full case
Japan vs Manufacturing Co. March 2013, Tokyo High Court, No 19

Japan vs Manufacturing Co. March 2013, Tokyo High Court, No 19

A Japanese manufacturing company was issued an estimated tax assessment due to lack of transfer pricing documentation. The District Court ruled in favor of the tax authorities. The Court decided that accounts and documents necessary for calculating arms’s length prices should be presented or submitted to the tax authorities without delay. If sufficient documentation is not submitted, the requirement for an estimated taxation is satisfied. Furthermore, in such cases the burden of proof shifts to the taxpayer side. See the transcripts from the district Court below. The case was then appealed by the company to Tokyo High Court, which also ruled in favor of the tax authorities. Click here for translation Japan-vs-Manufacturing-Co.083647_hanrei See transcripts from the district Court below. Click here for translation – Part 1 Click here for translation – Part 2 Click here for translation – Part 3 Dokumentationssag-082362_hanrei ... Continue to full case
Germany vs Doc GmbH , June 2011, Federal Tax Court, Case No X B 37/11

Germany vs Doc GmbH , June 2011, Federal Tax Court, Case No X B 37/11

In this case the Federal Tax Court confirmed the statutory authority of the tax authorities to issue penalties where a taxpayer have not fulfilled transfer pricing documentation requirement. Click here for translation BFH v 28 06 2011 - X B 37-11 ... Continue to full case