Tag: Wind turbines

Germany vs "Wind-farm PE", November 2021, Bundesfinanzhof, Case No I B 44/21

Germany vs “Wind-farm PE”, November 2021, Bundesfinanzhof, Case No I B 44/21

In 2011 a permanent establishment (PE) of a Danish company was established for income tax purposes in Germany in the form of an offshore wind farm. The PE had no employees of its own either in Germany or in Denmark. The technical and commercial management was carried out by two German service and management companies on the basis of management and service contracts. In 2013 the tax authorities issued an assessment related to taxation of assets which, according to allocation principles in the new AOA (significant people functions), would no longer be allocated to Germany. The tax authorities held that allocation of assets to the permanent establishment is determined on the basis of personnel functions exercised in the permanent establishment. If no personnel functions were carried out in the permanent establishment no assets were to be allocated to it. In the tax authorities view, this meant that the wind turbines previously allocated to the domestic permanent establishment as of 1 ... Read more
Ørsted in billion dollar transfer pricing dispute with the Danish tax authorities

Ørsted in billion dollar transfer pricing dispute with the Danish tax authorities

Ørsted is a Danish energy group that develops, constructs, and operates offshore and onshore wind farms, solar farms, energy storage facilities, renewable hydrogen and green fuels facilities, and bioenergy plants. According to a company announcement issued in December 2020, Ørsted has received an administrative decision from the Danish Tax Agency requiring Danish taxation of the company’s British offshore wind farms Walney Extension and Hornsea 1 in the tax years 2015 and 2016. The Danish Tax Agency’s claim amounts to DKK 5.1 billion, plus interest amounting to DKK 1.5 billion. According to the decision, Ørsted is to be taxed in Denmark on the full future value of the two offshore wind farms, despite the fact that they are developed, owned, and operated by British subsidiaries of the Ørsted group and are already taxed in the UK. The decision also entails that the date of taxation is brought forward, as Ørsted, according to the Danish Tax Agency, should be taxed on the ... Read more
Bulgaria vs KEY END ES ENERGY, April 2020, Supreme Administrative Court, Case No 4972

Bulgaria vs KEY END ES ENERGY, April 2020, Supreme Administrative Court, Case No 4972

Key End Es Energy concluded a share purchase and sale agreement of 20.12.2012 with a related party LUKERG BULGARIA GmbH, under which KEY END EU ENERGY transferred to its parent company LUKERG BULGARIA GmbH the ownership of the shares in eight subsidiaries. The subsidiaries owned a total of 15 wind turbines for the production of electricity and operated them on the Bulgarian energy market. According to the Purchase and Sale Agreement the price of the shares were BGN 20 935 937,75. Following an audit of the transaction the tax authorities issued an assessment of additional taxable income for FY 2012 related to the sale of shares. According to the authorities the arm´s length value of the shares were BGN 38 609 215,00. This value was determined based on a CUP/CUT method. As support/sanity check for the valuation the DCF method and the DuPont Analysis was also applied. The additional value was added to the taxable income of Key End Es ... Read more
Germany vs "Turbine Owner Gmbh", September 2016, Supreme Tax Court IV R 1 14

Germany vs “Turbine Owner Gmbh”, September 2016, Supreme Tax Court IV R 1 14

Tax depreciation for wind turbines presupposes economic ownership of the asset. A change in economic ownership requires that any risks are transferred to the purchaser/customer. The German Supreme Tax Court held that economic ownership of an asset is not transferred at the time it generates income but rather when the risk of accidental destruction and accidental deterioration of the asset passes to the buyer. The contractual agreements to that effect are crucial. A German partnership (KG) operated a wind farm consisting of five wind turbines. Each wind turbine on a farm is a separate asset which is to be depreciated, or amortised, separately. In December 2003 the KG entrusted a GmbH with the turnkey construction of the turbines. The purchase price was payable in installments. The GmbH in turn engaged another company with delivery and installation of the wind turbines and also to take them into operation. According to the contract, the risk of accidental destruction and accidental deterioration of the ... Read more