Tag: Withholding tax

Tax on income imposed at source, i.e. a third party is charged with the task of deducting the tax from certain kinds of payments and remitting that amount to the government. Withholding taxes are found in practically all tax systems and are widely used in respect of dividends, interest, royalties and similar tax payments. The rates of withholding tax are frequently reduced by tax treaties.

Denmark vs MAN Energy Solutions, September 2019, Supreme Court, Case No BS-4280-2019-HJR

Denmark vs MAN Energy Solutions, September 2019, Supreme Court, Case No BS-4280-2019-HJR

A Danish subsidiary in the German MAN group was the owner of certain intangible assets. The German parent, acting as an intermediate for the Danish subsidiary, licensed rights in those intangibles to other parties. In 2002-2005, the Danish subsidiary received royalty payments corresponding to the prices agreed between the German parent company and independent parties for use of the intangibles. The group had requested an adjustment of the royalty payments to the Danish subsidiary due to withholding taxes paid on inter-company license fees received by the German Parent. This was rejected by the Danish tax authorities. The Supreme Court found no basis for an adjustment for withholding taxes as the agreed prices between the German parent and the Danish Subsidiary matched the market price paid by independent parties. Click here for translation Denmark vs MAN Energy Solutions, September 2019, Supreme Court, Case No BS-4280-2019-HJR ... Continue to full case
Italy vs Agusta Holding BV, May 2019, Supreme Court, Case No 14527/2019

Italy vs Agusta Holding BV, May 2019, Supreme Court, Case No 14527/2019

A Dutch company, Agusta Holding BV, submitted a request regarding the reimbursement of withholding tax paid in Italy by its Italian subsidiary on dividends distributed for the fiscal year 2001. The request was initially accepted and the withholding tax paid back. But after an audit, the reimbursement was then challenged. The tax authorities found that Agusta Holding BV had been incorporated in the Netherlands only to benefit from the favourable fiscal dividend regime provided by the Italian-Netherland double tax treaty and from the Dutch tax regime concerning the exemption of dividends from taxable income. Agusta Holding BV appealed the decision of the tax office before the Provincial Tax Court which ruled in favor of Augusta Holding BV as the deadline to ask for the reimbursement of the withholding tax back had expired at the time of the audit conducted by local tax office. The local tax office appealed this decision before the Regional Tax Court. The Regional Tax Court overturned ... 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 CDC srl, December 2018, Italian Supreme Court, Case No 32255/2018

Italy vs CDC srl, December 2018, Italian Supreme Court, Case No 32255/2018

A refund of withholding tax on dividend payments from an Italien subsidiary, CDC srl, was claimed by the parent company in Luxembourg, CDC Net SA. The parent company had been subject to income tax in Luxembourg as required by the EU Directive, but in Luxembourg there were no actual taxation of the dividends. The refund was denied as, according to the authorities, the Luxembourg company did not meet the requirements of the EU Directive due to lack of actual taxation of the dividends in Luxembourg. The Supreme Court ruled in favor of the tax authorities and denied the refund of withholding taxes under the European Parent Subsidiary Directive (Directive 90/435/EEC, Article 5, paragraph 1, ) as no double taxation existed due to the dividend exemption regime in Luxembourg. Click here for translation Italy Dividend Supreme Court 2018 ... Continue to full case
Ghana vs Beiersdorf Gh. Ltd, August 2018, High Court, Case No CM/TAX/0001/2018

Ghana vs Beiersdorf Gh. Ltd, August 2018, High Court, Case No CM/TAX/0001/2018

Beiersdorf Gh. Ltd. imports and distributes Nivea skin care products from the parent company based in Germany, Beiersdorf AG). The tax authorities, CGRA, had issued an assessment where deductions for royalty payments to the German parent had been denied (non recognition – not legitimate business cost). Furthermore, alledged product discounts paid to third party vendors  had been characterized as sales commissions subject to withholding tax of 10%. Beiersdorf contended the assessment and filed an appeal. The appeal was based on three main grounds: The finding of CGRA that royalty payments made by the Appellant to Beiersdorf AG (BDF) pursuant to an agreement between Appellant and BDF for the use of the Nivea brand should not be allowed as a legitimate business cost because of the failure of the Appellant to comply with prior registration of the Royalty Agreement with the Ghana Investment Promotion Center is wrong in law. The finding of CGRA imposing liabilities with respect to withholding tax is wrong ... Continue to full case
Nokia paid 202 million euro to settle a long running dispute with the tax authorities in India

Nokia paid 202 million euro to settle a long running dispute with the tax authorities in India

Under the Mutual Agreement Procedure (MAP), Finland and India have settled a long running tax dispute involving Nokia. The tax authorities in India issued a tax assessment to Nokia for violating withholding tax regulations in India while making royalty payments to its parent company in Finland. An additional assessment was then issued by the tax authorities in India to the parent company in Finland for the same transaction as – according to the tax authorities – the company had a permanent establishment in India. According to the MAP settlement Nokia will pay 102 million euro in addition to the 100 million euro already paid in India during 2013-2015 ... Continue to full case
India vs Google, Oct. 2017, Income Tax Appellate Tribunal

India vs Google, Oct. 2017, Income Tax Appellate Tribunal

Google Ireland licenses Google AdWords technology to its subsidiary in India and several other countries across the world. The Tax Tribunal in India found that despite the duty of Google India to withhold tax at the time of payment to Google Ireland, no tax was withheld. This was considered tax evasion, and Google was ordered to pay USD 224 million. The case has now been appealed by Google to the Supreme Court of India. India-vs-Google-28-oct-2017-TAX-APPELLATE-TRIBUNAL ... Continue to full case
Germany vs. Corp, October 2014, Supreme Tax Court judgment I R 31/13

Germany vs. Corp, October 2014, Supreme Tax Court judgment I R 31/13

The German Supreme Tax Court rejected the tax administrations recharacterisation of a repayment of share capital to a payment of dividend. A German company resolved a share capital reduction of €16 m in preparation for a capital repayment to avoid an IFRS consolidation requirement for its sole shareholder, a public utility. It took the reduction to capital reserve, waited as required by the German Company Act for one year after a public announcement to it’s creditors, reported the reduction to the German trade registry and repaid an amount of €4 m to the shareholder. This repayment was sufficient to reduce the assets below the level for the consolidation requirement. The tax administration recharacterised the payment to a “dividend distribution” subject to withholding tax under the German Corporate Tax Act provision to the effect that payments to shareholders are deemed to be made from retained earnings unless unambiguously specified as repayments of share capital. The Supreme Tax Court concluded that the unambiguous ... Continue to full case
US vs Container Corp., May 2011, US COURT OF APPEALS, No. 10-60515

US vs Container Corp., May 2011, US COURT OF APPEALS, No. 10-60515

In this case a US subsidiary, Container Corp, had paid guaranty fees to its foreign parent company Vitro in Mexico. In the US tax return, the fee had been considered analogous to payments for services, and the income was sourced outside the United States and not subject to withholding tax. The IRS held that the guaranty fees were more closely analogized to interest and thus subject to withholding taxes of 30 %. The Tax Court issued an opinion siding with Container Corp. The Commissioner brought the opinion before the US Court of Appeals. The Court of Appeals also found in favor of Container Corp. “To determine what class of income guaranty fees fall within or may be analogized to, the court must look to the “substance of the transaction”. The Commissioner contends the guaranty fees are more closely analogized to interest, while Container Corporation argues that the fees are more closely analogous to payment for services.” “The source of payments ... Continue to full case