A Czech real estate company, AHI Oscar, had deducted the cost of intra-group services received from a related foreign service company. The price of the services had been calculated at a flat rate of 75% of the wages of the employees providing the support services, plus overhead costs. The tax authority found that the overhead costs included in the calculation did not correspond to the actual costs and excluded these costs from the calculation. According to the tax authority, it was irrelevant to consider the arm’s length principle under Section 23(7) of the ITA. AHI Oscar appealed to the Municipal Court, which upheld the tax authority’s assessment. AHI Oscar then appealed to the Supreme Administrative Court. Judgement of the Court. The Supreme Administrative Court overturned the decision of the Municipal Court. It was undisputed that AHI Oscar had actually incurred the declared costs and received the services from the related foreign service company. According to the court, the tax authority’s position on the taxpayer’s obligation to prove the actual basis of calculation is not supported by Section 24(1) of the ITA. However, this does not mean that the service charge should automatically be a fully deductible expense. Given the facts, it was therefore necessary to apply the transfer pricing rules under section 23(7) of the ITA, which the tax administrator did not do. As the case concerned 2012 and the 10-year general limitation period for tax assessment had expired, there would be no further assessment of the arm’s length amount from a transfer pricing perspective. Click here for English Translation Click here for other translation ...

Bavaria S.A. is part of the SABMiller group – a multinational brewing and beverage group – and in FY2013 the company had deducted costs related to various intra-group transactions – licences, cost of sales, procurement services, administrative services, technical support, other expenses (reimbursements to related parties), etc. Following an audit, the Colombian tax authorities disallowed the deduction of some of these costs. Deductions for investments in productive assets were also disallowed. This resulted in additional taxable income and an assessment was issued together with a substantial penalty. Judgement of the Supreme Administrative Court The Court partially upheld the assessment and partially annulled it. Excerpts “At this point it is necessary to clarify that, although the Administration alleges the violation of the arm’s length principle, insofar as it considers that no independent third party, in a comparable situation, would have paid the commission under the conditions carried out by Bavaria, the truth is that this assertion is only supported by the fact that the DIAN questioned whether SABMiller Procurement actually executed the functions that corresponded to it under the Global Supply Agreement. In fact, it should be noted that neither the censured act nor the opposition to the complaint challenged the validity of the supporting documentation provided by the plaintiff, which included information related to the operation carried out with SABMiller Procurement within the framework of the Global Sourcing Agreement. In other words, with the exception of the question of the performance of the duties, the DIAN did not provide any substantive reasons to support the infringement of the arm’s length principle. There is no evidence in the file to show that the remuneration in favour of the foreign related party was not paid on market terms and, consequently, there is no support for the defendant’s assertion that an independent third party would not have paid the commission. It is extremely important to remember that, for the purposes of questioning the remuneration paid by a taxpayer in favour of a foreign related party for non-compliance with the arm’s length principle, the DIAN must exercise the broad powers of inspection granted to it by articles 684 of the Tax Statute and, particularly, the third paragraph of article 260-2 ibidem. Note that the jurisprudence of this Section13 has warned that, if in the exercise of its functions, the Administration detects irregularities in the transfer pricing study, it is obliged to contradict it through a similar report that calculates the common profit margins in the market for comparable operations, agreed between independent parties, However, there are no such documents in the file.” “Chamber notes that there is no dispute between the parties as to the nature of the expenses in question, as both agree that they correspond to administration expenses incurred by the plaintiff in favour of its parent company abroad. Likewise, the parties agree that the payments made by the plaintiff to its parent company were not subject to withholding tax as they were foreign source income. In these circumstances, it is not possible to accept the deductibility requested by the plaintiff (i.e. administration and management expenses to the head office or offices abroad) in the light of Article 124 of the Tax Statute, since for this it was essential that the expense had been subject to withholding tax, as has been held by the jurisprudence of this Section and the Constitutional Court. The fact that the plaintiff was subject to the transfer pricing regime does not change this conclusion, which, it is reiterated, the withholding tax referred to in Article 124 is not a limitation, but a condition or condition of acceptance, against which there is no exclusion whatsoever for taxpayers subject to the aforementioned regime. Finally, it should be noted that, contrary to the plaintiff’s request, the deductibility of the disputed expenditure cannot be analysed in the light of Article 122 of the Tax Statute. This is because the rule regulates the deductibility of payments abroad, as a generic restriction and not subject to economic linkage for expenses incurred abroad to obtain income from national sources and for concepts other than administration expenses in favour of the parent company or offices abroad, which are the ones at issue in the specific case. In this respect, Article 124 expressly provides that “(…) Payments in favour of such parent companies or offices abroad for other different concepts are subject to the provisions of Articles 121 and 122 of this Statute”. (highlighted by the Chamber). The charge is not upheld. Consequently, the disallowance of $47,834,099,000 for administrative operating expenses for administrative services is maintained.” “The evidence in the case file shows that, under the CSA, Bavaria took as expenses the sum of USD4,720,084 and that it recorded invoiced expenses for technical assistance of USD16,472,000, equivalent to USD30,627,037,436, the latter being reported as technical assistance expenses with its foreign affiliate, SABMiller Latin America (Miami), in the supporting documentation. These figures total USD21,192,081, which does not exceed the figure of USD24,573,83 that would correspond to Bavaria under the CSA. In turn, in the Official Review Settlement, in order to conclude that Bavaria had been assigned a percentage greater than 34.4% (which is 87.5% of the 39.3%), the DIAN said that the plaintiff assumed expenses corresponding to USD30,097,400, as a result of adding the allocation of USD13,625,400 made by SABMiller Miami to Colombia with the USD16,472,000 invoiced by SABMiller Miami Bavaria itself. However, the truth is that this addition is not justified in the CSA criteria, and in the official assessment accused, there is no explanation, at least in summary, to justify this sum. It is not possible to reach the conclusion reached by the DIAN in the official assessment accused, according to which Bavaria assumed or recorded technical assistance expenses of USD30,097,851.” Click here for English translation Click here for other translation ...

STOCK Plzeň-Božkov, s. r. o. had deducted costs for production consultancy services, financial services and internal support services allegedly received from related parties. The tax authorities disallowed deduction of the costs for tax purposes on the basis that the evidence provided by STOCK regarding the nature and pricing of the services was insufficient. Judgement of the Supreme Administrative Court The Court ruled in favour of STOCK in relation to the production consultancy services. The tax authority’s requirement that the company document each individual ‘piece of advice’ and quantify the benefits in minute detail was unreasonable. According to the Court, it is sufficient to explain how the production services were provided and what benefits the company derived from them. The Court agreed with the tax authority’s conclusions regarding the financial services. STOCK did not document the conditions of withdrawal or the amount of credit granted to group companies. Furthermore, it did not prove that the part of the consultancy price allocated to it, calculated as the ratio between the drawdown and the total credit provided to the group, was correct. In addition, it was not even clear from the documents what the service specifically related to. The court also agreed with the tax authorities on the internal support services. The documents, witness statements and e-mails provided by STOCK were not sufficient to prove that the services had been received. Click here for English Translation Click here for other translation ...

In its application for an individual interpretation, R. S.A. stated that it distributes fast moving goods in Poland, Lithuania, Latvia and Estonia. It purchases these goods from the company E. based in H. and sells them to independent wholesale distributors and retailers. At the applicant’s request, the Minister of Finance in 2015 issued a decision on a advance price agreement, recognising the correctness of the selection and application of the transactional net margin method in the applicant’s purchase of goods from a related party for further distribution in the Baltic States. In the activities covered by the decision, R. S.A. performs the functions of a distributor with limited risk and limited marketing functions and incurs the associated operating costs, which consist of both its own costs (purchase from group entities of, inter alia, advisory, legal, technical, organisational, financial and marketing/sales services) and external costs (including the costs of services purchased from other entities, also related parties, subsequently re-invoiced to the beneficiaries of those services). According to the decision, R. S.A. should have a constant profitability, determined on the basis of the operating profit ratio (operating profit related to the activities covered by the decision, shown in the income statement before financial income and expenses), with only selling and general administrative expenses included in operating expenses. To this end, an algorithm for the calculation of the transaction price in transactions for the purchase of goods was defined, which includes all types of costs referred to as operating costs, which also include the costs of intra-group services mentioned in the application, incurred in connection with the applicant’s distribution and marketing activities. R. S.A. asked whether the described costs of intragroup services, due to the fact that they are already covered by the issued decision on the prior price agreement, are subject to the restrictions under Article 15e(15) of the Corporate Income Tax Act – taking the position that these restrictions do not apply. In an individual interpretation the Director of the National Fiscal Information considered R. S.A.’s position to be incorrect. He pointed out that the prior price agreement was not concluded for the purpose of determining the amount of prices/expenses for the purchase of services from the other related parties in the group, and the decision issued in this respect involves an analysis of the conditions established only between the specified related parties, so it cannot be considered that also the services purchased from other related parties and included in the algorithm for calculating the transaction price constitute a confirmed element of the prior price agreement. Therefore, the restriction arising from Article 15e(1) of the APS will apply to the costs of intra-group services. R. S.A. challenged this interpretation before the Administrative Court. The court noted that the interpreting authority did not fully and exhaustively refer to the applicant’s position contained in the request for an interpretation, namely that the costs of intra-group services constituting the content of the interpretation question were included in the algorithm for calculating the transaction price. An appeal was then filed by the authorities with the Supreme Administrative Court. Judgement of the Supreme Administrative Court. The Court dismissed the appeal and upheld the decision of the Administrative Court. Excerpts “As aptly noted by the Provincial Administrative Court in the justification of the appealed judgment, since the operating costs inquired about by the applicant in its request for an individual interpretation of the tax law provisions were an element of the algorithm for calculation of remuneration in the transaction covered by the decision on the previous price agreement, which decision includes an analysis of the conditions established between certain related entities, it cannot be concluded that the services purchased from other related entities and included in that algorithm do not constitute a confirmed element of that agreement; the criterion that is decisive here is the subject matter criterion and not the entity criterion – provided that the profitability of the assessed entity in the distribution activity is not adversely affected as a certain percentage of the sales revenue agreed in the decision. Therefore, if it follows from the description of the facts presented in the request for interpretation that the algorithm for calculation of the transaction price includes all types of operating costs, including the aforementioned costs of intragroup services to which the question relates, then also these costs constitute an element of a confirmed prior price agreement. Therefore, the Director of the National Fiscal Information unfoundedly alleged that the Voivodship Administrative Court in Warsaw breached Article 15e(15) in conjunction with Article 15e(1) of the A.p.d.o.p. by misinterpreting and, consequently, misapplying it. The assumption that Article 15e, paragraph 15 of the A.p.d.o.p. refers to the subjective scope of validity of the decision on price agreement referred to in Article 20a of the A.p.p. corresponds to the content of Article 15e, paragraph 15 of the A.p.d.o.p., which directly indicates the correctness of calculation of remuneration for services, fees and charges in the period to which the decision refers. There is also an entity criterion, but it refers to the addressee of the decision provided for in Article 20a of the P.P.O., i.e. – in the case at hand – the applicant Company. Although the decision on the previous price agreement includes an analysis of the conditions established between certain related entities, its essence is the determination of the correctness of the algorithm for calculation of the transaction price, and this correctness is not affected by the subjective side of the service provider, if it is still a related entity. Therefore, there is no normative basis for the conclusion proposed by the interpreting authority that, in the case of the acquisition of services included in the algorithm for calculating the transaction price from other related entities, the costs of these intra-group services – the characteristics of which have not changed in a manner affecting the correctness of the algorithm – are subject to limitations in inclusion in tax deductible costs under Article 15e(1) of the APS. The allegations of ...

The tax authorities had disallowed deductions for purported administrative services paid for by Akzo Nobel India to a group company in Singapore. The Income Tax Appellate Tribunal upheld the assessment in a Judgement issued in February 2022. An appeal was then filed by Akzo Nobel India with the High Court. Judgement of the High Court The High Court dismissed the Appeal of Akzo Nobel India and upheld the judgement of the Income Tax Appellate Tribunal. Excerpt “…this Court finds that all the three authorities below have given concurrent findings of fact that the Appellant had failed to furnish evidence to demonstrate that administrative services were actually rendered by the AE and the assessee had received such services. In fact, the ITAT has noted in the impugned order “….On a specific query made by the Bench to demonstrate the receipt of services from AE through cogent evidence, including, any communication with the AE, learned counsel for the assessee expressed his inability to furnish any evidence and repeated his submission to restore the matter back to the Assessing Officer for enabling the assessee to furnish evidence, if any.” (…) “Further , this Court in Principal Commissioner of Income Tax-6 vs. Make My Trip India (P) Ltd., (2017) 87 taxmann.com 284 (Delhi) has held that difference of opinion between the parties, as to the appropriateness of one or the other methods to calculate arm’s length price, cannot per se be a ground for intereference and the appropriateness of the method unless shown to be contrary to the Rules specially 10B and 10C are hardly issues that ought to be gone into under Section 260A of the Act.” “Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal and the same is accordingly dismissed.” ...

In 2009-2011 Fortis Petroleum Norway AS (FPN) bought seismic data related to oil exploration in the North Sea from a related party, Petroleum GeoServices AS (PGS), for NKR 95.000.000. FBN paid the amount by way of a convertible intra-group loan from PGS in the same amount. FPN also purchased administrative services from another related party, Consema, and later paid a substantial termination fee when the service contract was terminated. The acquisition costs, interest on the loan, costs for services and termination fees had all been deducted in the taxable income of the company for the years in question. Central to this case is the exploration refund scheme on the Norwegian shelf. This essentially means that exploration companies can demand cash payment of the tax value of exploration costs, cf. the Petroleum Tax Act § 3 letter c) fifth paragraph. If the taxpayer does not have income to cover an exploration cost, the company receives payment / refund of the tax value from the state. On 21 November 2018, the Petroleum Tax Office issued two decisions against FPN. One decision (the “Seismic decision”) which applied to the income years 2010 to 2011, where FPN was denied a deduction for the purchase of seismic services from PGS and interest on the associated seller credit, as well as ordinary and increased additional tax (hereinafter the «seismic decision»), and another decision (the “Consema decision”) which applied to the income years 2011 and 2012 where, FPN’s claim for deduction for the purchase of administrative services from Consema for the income years 2011 and 2012 was reduced at its discretion, and where FPN was also denied a deduction for the costs of the services and a deduction for termination fees. Finally in regards of the “Seismic decision” an increased additional tax of a total of 60 per cent, was added to the additional taxation on the basis of the incorrectly deducted seismic purchases as FPN had provided incorrect and incomplete information to the Oil Tax Office. In the “Seismic decision” the tax office argued that FPN used a exploration reimbursement scheme to run a “tax carousel” In the “Consema decision” the tax office found that the price paid for the intra-group services and the termination fee had not been determined at arm’s length. An appeal was filed by Fortis Petroleum Norway AS with the district court where, in December 2020, the case was decided in favour of the tax authorities. An appeal was then filed with the Court of Appel Judgement of the Court of Appeal The court upheld the decisions of the district court and decided in favour of the tax authorities. The Court concluded that the condition for deduction in the Tax Act § 6-1 on incurred costs on the part of Fortis Petroleum Norway AS was not met, and that there was a basis for imposing ordinary and increased additional tax. The Court of Appeal further found that the administrative services and the termination fee were controlled transactions and had not been priced at arm’s length. Excerpts – Regarding the acquisition of seismic exploration Based on the case’s extensive evidence, and especially the contemporary evidence, the Court of Appeal has found that there was a common subjective understanding between FPN and PGS, both at the planning stage, during the conclusion of the agreement, in carrying out the seismic purchases and in the subsequent process. should take place by conversion to a subscription price that was not market-based. Consequently, seismic would not be settled with real values. This was made possible through the common interest of the parties. The parties also never significantly distanced themselves from this agreement. The Court of Appeal has heard testimonies from the management of PGS and FPN, but can not see that these entail any other view on the question of what was agreed. The loan was never repaid, and in the end it was converted to the pre-agreed exchange rate of NOK 167. In the Court of Appeal’s view, there is no other rational explanation for this course than that it was carefully adapted to the financing through 78 per cent of the exploration refund. The share value at the time of conversion was down to zero. The Court of Appeal agrees with the state that all conversion prices between 167 and 0 kroner would have given a share price that reflected the value in FPN better and which consequently had given PGS a better settlement. On this basis, the Court of Appeal believes that the conversion rate did not cover the 22 percent, and that there was a common perception that this was in line with the purpose of the establishment of FPN, namely not to pay “a penny” of fresh capital. The Court of Appeal has also emphasized that the same thing that happened in 2009 was repeated in 2010 and 2011. For 2009, the Oil Tax Office came to the conclusion that it was a pro forma event and a shift in financial risk. In 2010 and 2011, the same actors used the same structure and procedure to finance all costs from the state. It is thus the Court of Appeal’s view that there was a common understanding between the parties to the agreement that the real relationship within was different from that which was signaled to the tax authorities regarding sacrifice and which provided the basis for the deduction. Furthermore, in the Court of Appeal’s view, the loan transactions were not fiscally neutral. The seismic purchases constituted the only source of liquidity and were covered in their entirety by the state. In light of ESA’s decision from 2018 as an element of interpretation, such a loss of fiscal neutrality would indicate that when the company has thus not borne any risk itself, sacrifice has not taken place either. Even if the debt had been real, assuming a sale without a common interest of the parties, in the Court of Appeal’s view in a tax context it could not be decisive, as long as 22 ...

A S.A. is 51% owned by B SA and 49% by C Corp. A S.A is active in development of energy efficiency projects. In 2015 A S.A took out loans from B and C at an annual interest rate of 3.22xEuribor 12 months, plus a spread of 14%. A S.A had also paid for services to related party D. The tax authorities issued an assessment related to the interest rate on the loan and the service purportedly received and paid for. A complaint was filed by A S.A. with the Administrative Tribunal (CAAD). Judgement of the CAAD The complaint of A S.A was dismissed and the assessment upheld. Excerpts regarding the interest rate “Now, regarding the first argument, it falls immediately by the base, since the Applicant has not proved that it had made any effort to finance itself with the bank and that this effort was unsuccessful. On the contrary, it seems to result from the request for arbitration award that the Claimant and its shareholders have immediately assumed that, given the financial situation that the country was still experiencing in 2014, any request for financing made by a newly created entity and without business expectations would be rejected outright by all banks. For that reason, the Claimant did not prove, nor could it, that the interest it contracted with its shareholders was more favourable to it than what the banks would demand from it. In short, it cannot but be stated that, in view of this, the Defendant could not assume any other position than to investigate whether the shareholders of the Claimant had taken advantage of the socio-financial context of the country to contract a fixed spread of 14%. … As the Respondent summarized very well in its allegations (no. 58) That is, if an independent bank agreed to provide financing to the Claimant, of similar amount and term to the shareholder loans, remunerated at an annual nominal interest rate (TAN) calculated according to the monthly average of the 6-month Euribor rate of the previous month, plus a spread of 3 percentage points, then nothing justifies that the partners require from the company a remuneration for the shareholder loans that includes a spread of 14 percentage points.” Excerpts regarding the services “But it was not only the formal issue that justified the position of the AT and that leads this Court to agree with it. The absence of material evidence that the work had been performed is further compounded by the fact that, during the inspection, the AT found invoices (which the Claimant has registered in its accounts under account “62213 – Specialized work”), issued by the accounting firm “H…, Lda, as well as other “Specialized work”, for services related to the execution and management of the contracts, issued by suppliers B… and I…, which indicates that entities other than D… were involved in the provision of services. The management services for the … and of …, which were ongoing in 2017, and whose invoicing started that year, were performed by B… and I… and not by D… . Thus, the association of all the facts necessarily leads to the non-deductibility of D…’s invoice, since it was up to the Claimant to prove that the work was performed by D… and it failed to do so. As recently decided by the South Administrative Central Court in its ruling of 27 May 2021 in case no. 744/11.1BELRA (available at www.dgsi.pt) I- Invoices are not only relevant documents for the purpose of exercising the right to deduct, but also relevant for the purpose of exercising the AT’s control powers. II- There is no hierarchy between the various requirements imposed on invoices. III- The CJEU has held that the right to deduct is admissible even if some formal requirements are not met by invoices, provided that the material situation is demonstrated. IV- The failure to scrupulously comply with the formalities required in terms of issuing invoices may not compromise the exercise of the right of deduction, provided that the substantive requirements have been complied with and that the AT has all the elements to substantively characterise the transaction, it being understood that the burden of proof will rest with the taxable person. V- As no documentary evidence has been submitted containing a content that enables the gaps in the invoices to be overcome, the right to deduct is not admissible. Therefore, as the Claimant has not complied with the provisions of nos. 3 and 4 of article 23 of the CIRC, by virtue of paragraph c) of no. 1 of article 23-A, the invoice for the provision of services in the amount of €30,000.00, which determines the correction of the taxable income in that amount, cannot be deductible.” “Based on these grounds, the Court decides to consider the request made by the Claimant as totally unfounded” Click here for English translation Click here for other translation ...

A SGPS S.A. is the parent company of Group A. In 2016, a subsidiary, B S.A., took a loan in a bank, amounting to 1,950,000.00 Euros, and incurred interest costs and Stamp Tax. However, the majority of the loan, an amount of €1,716,256.60, was transferred as an interest free loan to A SGPS S.A. The tax authorities issued an assessment related to costs incurred on the loan and deducted by B S.A. The tax authorities disallowed B S.A.’s deduction of the costs as they were not intended to protect or obtain income, and therefore did not meet the requirements for deductibility under the general provisions of the Tax Code; A complaint was filed by A SGPS S.A. with the Administrative Tribunal. According to A SGPS SA the tax authorities did not justify why it considered that the expenses incurred by B S.A. to an independent bank for a loan that was passed on to the parent company were not deductible. According to A SGPS SA, this was not an issue of requirements for deductibility , but rather a question of transfer pricing. Hence, the correct framework for an adjustment would be that of article 63 regarding pricing of controlled transactions and not the general provisions in Article 23 of the Tax Code. Therefore the tax authorities had erred in law. Judgement of the CAAD In regards of B S.A.s deductions of loan expenses, the complaint of A SGPS S.A was dismissed and the assessment upheld. According to the tribunal, expenses held by a subsidiary to grant a loan to a parent company could not be said to “protect or obtain income” of the subsidiary since it did not own the parent company. “…the basic rule of deductibility of expenses is stated in article 23, no. 1 of the IRC Code, which, in its normative hypothesis, contains the respective constitutive assumptions, of a substantive nature, requiring a connection between the expenses and the activity generating income subject to IRC. Note that this is not a requirement of a direct causal relation between expenses and income (see Judgments of the Supreme Administrative Court of 24 September 2014, Case No. 0779/12; of 15 November 2017, Case No. 372/16; and of 28 June 2017, Case No. 0627/16, of 28 June 2017 ). The latter judgement considers “definitively ruled out a finalistic view of indispensability (as a requirement for costs to be accepted as tax costs), according to which a cause-effect relation, of the type conditio sine qua non, between costs and income would be required, so that only costs for which it is possible to establish an objective connection with the income may be considered deductible”. The causal connection should be made between the expenses and the activity globally considered (going beyond the strict expense-income nexus), and the Administration cannot assess the correctness, convenience or opportunity of the business and management decisions of the corporate entities. As highlighted by the Judgment of the Supreme Administrative Court of 21 September 2016, Case No. 0571/13 “[t]he concept of indispensability of costs, to which article 23 of the CIRC refers, refers to the costs incurred in the interest of the company or supported within the scope of the activities arising from its corporate scope”. On the other hand, this construction requires a link of subjective imputation that is implicit in the relationship required between the expense and the activity. This link must be made with the specific activity of the taxpayer and not with any other activity, namely that of its partners or third parties. It is in this framework that the corrections under analysis are based and not on the transfer pricing regime (see article 63 of the IRC Code), or on the “anti-abuse” regime, for which reason the assessment of the latter does not belong here. The Court is limited to the knowledge of the reasons expressed in the contemporaneous grounds of the tax act and if a correction has several valid grounds, only those that have been invoked as grounds for the contested act may be assessed. In this case, the only basis of the addition to the taxable amount of the deducted financial costs respects to the non-compliance of the assumptions of article 23, no. 1 of the Corporate Income Tax Code. As the conditions that integrate the normative hypothesis are not met, one cannot but validly conclude, together with the Defendant, that the deduction is not admissible. This, without prejudice to the fact that the factual situation may possibly be subject to a concurrent framework in other rules, which, as said, it is not for us to assess if they are not part of the foundations of the tax acts. The point is that the legal-tax regime effectively applied is based on correct legal and factual assumptions. … Taking into account the criterion described, the granting of free loans by B…, S.A. to the parent company [the Claimant] does not appear susceptible of being regarded as an activity of management of a financial asset by the former, since it is not the latter that holds shares in the parent company, but the opposite. In effect, there is no asset of which B…, S.A. is the holder that underlies this financing operation to the parent company. Nor can the argument regarding the exercise of significant influence over management, usually measured (in relation to subsidiary companies) by a percentage holding of at least 20%, be invoked in these circumstances to judge that the interest in the investment has been verified. Here, the significant influence is exercised in the opposite direction, since the parent company holds 92% of the capital of the Claimant. Therefore, it is concluded that the non-interest bearing financing granted by B…, S.A. to the Claimant are not carried out within the scope of the activity of the former and in its economic interest, so, in agreement with the Defendant, the financial costs incurred do not pass the test of the necessary causal relation between the expenses incurred and the activity of ...

Akzo Nobel India Pvt – a subsidiary of Akzo Nobel Coatings International BV – had paid for administrative services purportedly rendered form a group company in Singapore and had claimed a deduction of INR 19,465 250. The price paid for these services had been determined by the group on an aggregate basis using the transactional net margin method to establish that all controlled transactions in Akzo Nobel India had been at arm’s length. During the audit, the tax authority requested Akzo Nobel India to justify the arm’s length nature of the payment for these administrative services. To that end Akzo Nobel India submitted a copy of the agreement and the allocations keys used. Akzo Nobel India also submitted that the group company in Singapore had provided administrative support services like supply chain management support, marketing and commercial service support, commercial vehicle support, automotive after-market support, supporting R&D, human resource, finance management and general management support. However, according to the tax authorities, Akzo Nobel India failed to provide any evidence to demonstrate receipt of these services and therefore determined the arm’s length price to be nil. The Commissioner of Appeals upheld the adjustments made by the tax authority. Aggrieved with the decision of the Commissioner, Akzo Nobel India filed an appeal before the Income Tax Appellate Tribunal. Judgement of the Income Tax Appellate Tribunal The Tribunal dismissed the appeal and noted that the tax authorities had given concurrent findings that Akzo Nobel India failed to furnish even an iota of evidence to demonstrate that administrative services were actually rendered. During the trial, the Tribunal had asked Akzo Nobel India to demonstrate the receipt of services from the associated enterprise through cogent evidence, including any communication with the associated enterprise in Singapore. In response Akzo Nobel India expressed inability to furnish such evidence and requested restoring the matter back to the assessing officer. To this, the tribunal stated that restoring the case back to the assessing officer would serve no useful purpose ...

IAB Company had deducted fees paid for services to its parent, IAL. Following an audit the tax authorities denied these deductions as sufficient evidence had not been provided for provision of the services. An appeal was filed by IAB Company. Judgement of the High Court. The Court upheld the assessment of the tax authorities concerning management fees and dismissed the appeal of IAB Company in this regard. Excerpts from the judgement: “In a nutshell the issue here is whether or not the appellant received management services from IAL for the tax years 2010 to 2015. ” (…) “The authorities must not look at the matter from their own view point but that of a prudent business an – SA Builders Ltd v CIT (2006) 289 ITR 26 (SC).  Further, I agree with what was stated by Australia’s Full Federal Court on the function of the tax authorities and fiscal legislation.  In FC of T v BHP Billion Finance Ltd 2010 ATC 20169 at paragraph [18] the said court quoted with approval from Tweddle v FCT (1942) 180 CLR at 7 where WILLIAMS J staid that: “it is not suggested that it is the function of the Income Tax Acts or those who administer them to dictate to tax payers in what business they should engage or how to run their business profitably or economically.  The Act must operate upon the result of a tax payer’s activities as it finds them.  If a tax payer is in fact engaged in two businesses, one profitable and the other showing a loss, the Commissioner is not entitled to say he must close down the unprofitable business and cut his losses even if it might be better in his own interests and although it certainly would be better in the interests of the Commissioner if he did as: Toohey’s Ltd v Commissioner of Taxation (NSW) (1922) 22 SR (NSW) 432 at pp 44044,]” Further, in Income Tax case number (1847) 73 SATC 126 the court reminded the Commissioner of SARS after the latter had disallowed management and marketing fees paid by a subsidiary to its holding company that: “it is not for the court or the Commissioner to say, with the benefit of hindsight be disallowed on the basis that it was not strictly ‘necessary’, or that it was not as effective as it could have been.  If the purpose of the expenditure was to produce income, in the course of trade, and the expenditure was not of a capital nature, then that is sufficient.  Accordingly, the respondent was wrong in his assessment of these fees.”  In this said case the court accepted that, many a time a subsidiary is utterly dependent on its holding company for its effective functioning.  The holding company had used its muscle, as a long established public company, to raise capital for the tax payer and from the evidence it was clear the tax payer needed the management input of the holding company and received it.  It need the global vision and strategic advice of the cosmopolitan, internationally experienced team from the holding company.  The management service fees charged by the holding company to the subsidiary were held to be in line with the norm in the industry. I will now consider the evidence before me in light of the above principles.” (…) “Firstly, the determination is whether the conclusion of a contract for service necessarily means that the services had been rendered.  Put differently, the question is whether a payment made pursuant to the conclusion of service level contract amounts to incurring expenditure for purposes of deductions permissible in terms of s15 (2)(a) of the Act.  In my view, the signing of the service level contract is not sufficient for the appellant to incur obligation to pay management fees.  In the circumstances I have to determine the second issue i.e. whether in fact any services were rendered by IAL, and if so, what the services were and how much was charged in respect of services.  This two-stage inquiry is evinced by the splitting of the issues in the joint minute of the parties.  The first issue being the question management services were rendered by IAL and the second being a determination of the extent of such services. I am in agreement with the contention of the respondent that the execution of a service level agreement between the appellant and its holding company, IAL, does not amount to incurring any legal obligation in respect of management fees.  Like any other contract, the incurrence of a legal obligation depends on the performance by the parties of their obligations in terms of the contract.  There being no evidence that the appellant received specified services from IAL during the tax period under consideration (and if so the extent thereof) no legal obligation was incurred by the appellant in respect of management fees.” (…) “The Finance Director for appellant testified and his testimony remarkably contradicted that of the Group Finance Director of IAL on the fundamental premise upon which the notices in issue were raised.  He contended that the invoices were issued on the basis of services rendered and by implication suggested that if services were not rendered for any particular portion of the period concerned, the appellant would not be obliged to pay IAL.  In contradiction the Group Finance Director had testified that the rendering of a service was not a pre-requisite for the charge which IAL raised on a monthly basis to the appellant.  The evidence of these witnesses was therefore, mutually destructive.  The appellant’s Finance Director stated that the yearly fees were registered and agreed upon the commencement of the year.  He, however, had no documents as proof of such negotiations on the fees.  He did not provide any rational basis for the charge which was raised by IAL to the appellant.  He also admitted IAL exists for its own purposes and does not exist to provide service to the subsidiary only.  It was therefore, necessary to separate the functions ...

Interoil Colombia Exploration and Production S.A. paid it foreign parent for cost related to exploration and administrative services, and for tax purposes these costs had been deducted in the taxable income. In total $3,571,353,600 had been declared as operating expenses for geological and geophysical studies carried out in the exploratory phase of an oil project and $5.548.680.347 had been declared for administrative services rendered from its parent company abroad Following an audit the tax authorities issued an assessment where these deductions was denied. In regards of cost related to exploration, these should have been recorded as a deferred charge amortisable over up to five years, according to articles 142 and 143 of the Tax Statute. In accordance with Article 142, these investments are recorded as deferred assets and are also declared for tax purposes. (…) According to the general accounting regulations – Decree 2649 of 1993 – deferred assets are part of the company’s assets, and correspond to anticipated expenses or goods and services from which benefits are expected to be obtained in other periods. These items are recorded as assets until the corresponding economic benefit is fully or partially consumed or lost. In other words, as deferred assets are utilised, they are transferred to amortised expense. Expenses that have not been used by the company must be kept in the assets. But once the deferred asset starts to help generate income, it can be incorporated as an expense. In regards of deductions of $5.548.680.347 for payments made by Interoil Colombia to its parent company abroad for administration services, these were denied because Interoil Colombia did not, as required by law, withhold tax at source. Decision of the Administrative Court In a split decision the appeal of Interoil Colombia was dismissed and the assessment upheld. Excerpts Disallowed deductions for payments related to exploration “… as there is a precise regulation within the tax regulations on the form and requirements needed to make the amortisation of investments deductible, the application of accounting rules is not appropriate, in accordance with the provisions of article 136 of Decree 2649 of 1993 and in application of the special rules that are applied in preference to the general rules. Likewise, with regard to the method for the amortisation of investments, the Section pointed out that : “Article 143 E.T. contains, in a perfectly independent and separate manner, the requirements for the amortisation of each of the situations set out therein. Thus, in subsection 1° it refers to the investments described in article 142 and, with respect to these, it orders that ‘they may be amortised in a term of no less than five (5) years, unless it is demonstrated that, due to the nature or duration of the business, the amortisation must be made in a shorter term’. “It then sets out, in paragraphs 2 and 3, special cases of amortisation different from the general one, for which it determines particular requirements. Subsection 2 refers to when it is intended to amortise ‘Costs of acquisition or exploration and exploitation of non-renewable natural resources’, in which case, amortisation may be made ‘based on the system of technical estimation of the cost of operating units or by straight-line amortisation, over a period of not less than five (5) years’; and paragraph 3 refers specifically to ‘contracts where the taxpayer contributes goods, works, installations or other assets such as concession, shared risk or joint venture contracts’, in which case, the term for amortisation is limited to the duration of the contract until the moment of transfer, and, for the latter, it orders that the amortisation be carried out ‘by the straight line or balance reduction methods, or by another method of recognised technical value authorised by the National Tax and Customs Directorate’. The application of the successful efforts method is therefore rejected, taking into account that, as stated above, articles 142 and 143 of the E.T. are applicable, which indicate how the expenses incurred by the plaintiff in the exploratory stage should be treated. It is reiterated that the cited rules mention the accounting technique regarding the registration of the investment, either as a deferred asset or cost, and do not refer to the accounting to determine the conditions of amortisation, which are clearly described in Article 143 of the E.T. In this way, the Court finds that the accused acts are in accordance with the law in that they rejected the deduction for operating expenses for $3,571,353,600 and took this value as a deferred asset that can be amortised so that once the expected income is generated, it is incorporated as an expense and recognised as such. In this sense, article 69 of Decree 187 of 1975, which refers to the amortisation of investments or losses, foresees that in cases in which the explorations are unsuccessful or non-productive, the expenses in exploration, prospecting or installation of wells or mines can be amortised with income from other productive exploitations of the same nature. In other words, in the event that the project associated with the expenditure for geological and geophysical studies proves to be unsuccessful, the claimant can amortise these values with the income from other productive exploitations of the same nature.” Disallowed deductions for payments related to administrative services “Payments made to parent companies or offices abroad for administration or management expenses, as well as those recognised for royalties and exploitation or acquisition of intangibles, are deductible from their income as a cost or deduction, provided that the respective withholding at source of income tax and remittances has been made on such payments, and furthermore, that the same constitutes national source income for the person who receives it. Therefore, if the payments to the parent companies are taxable in Colombia and, therefore, are subject to withholding tax, they will be deductible for whoever pays them, obviously in the case of income considered to be of national source; on the contrary, if the payments referred to are of foreign source and, therefore, are not taxable through the withholding ...

SONY Music Entertainment Colombia S.A. had filed transfer pricing information and documentation, on the basis of which the Colombian tax authorities concluded that payments for administrative services provided by a related party in the US had not been at arm’s length. SONY Colombia then filed new transfer pricing information and documentation covering the same years, but where the tested party had been changed to the US company. Under this new approach, the remuneration of the US service provider was determined to be within the arm’s length range. The tax authorities upheld the assessment issued based on the original documentation. A complaint was filed by SONY and later an appeal. Judgement of the Administrative Court The court allowed the appeal and issued a decision in favor of SONY. Excerpts “The legal problem is to determine, for the tax return of the taxable period 2007 of the plaintiff: (i) Whether it is appropriate to take into account the correction of the transfer pricing information return submitted by the plaintiff and its supporting documentation, and whether the information submitted is sufficient to determine compliance with the arm’s length principle. … In the present case, the DIAN [tax authorities], by means of the contested acts, disregards operating expenses of $1,963,235,000 of the plaintiff’s income tax return for the taxable period 2007, because it considered that the administrative expenses that the plaintiff paid to its related party in the United States of America (United States) were not adjusted to market prices, which had been agreed with other suppliers. In order to justify the disregard of the aforementioned expenses, the DIAN took as reference the individual informative declaration of transfer prices (DIIPT) and the supporting documentation initially submitted by the plaintiff, in which it was determined that it was outside the market range. Furthermore, it stated that if the corrections to the DIIPT and the supporting documentation are taken into account, there is no reason to justify that the analysis of administrative expenses should be carried out for the company located abroad. For its part, the plaintiff considers that the DIIPT and the initial supporting documentation should not have been taken into account, due to the fact that the correction was made in which it is demonstrated that the expenditure operation was carried out at market values, since the related company in the United States should be analysed, and not the company in Colombia as was done in the original declaration. … From the cited provisions it is clear that there is room to impose a sanction in the case of the correction of the individual informative declaration or of the supporting documentation, in the event of errors or inconsistencies in these documents. On previous occasions, this Court has recognised that it is appropriate to correct the information return and supporting documentation. However, regardless of whether the correction of the return or of the supporting documentation is punishable, such corrections should be examined by the Administration, in order to determine whether the transactions recorded by the taxpayer with his economic partners were in accordance with the arm’s length principle. …. In addition, the documentation clarifies that the reason for the study from the company abroad was an administrative services contract that had been in place since 2005, for which the company abroad was paid $3,569,194,000, a payment that was corroborated by the DIAN in the audit process by means of the withholdings made, transactions carried out and items paid. This contract was submitted to the file and shows that Sony Colombia and Sony United States agreed that “The Services provided by SBME will be invoiced to the Company at a rate calculated at cost plus an increase of 8%. The Services will be billed periodically, but in no case will they be billed for periods longer than one year”, a clarification together with the global situation of the music industry that justifies the Markup analysed, and the comparable companies in the supporting documentation. … Consequently, it is reiterated that the change of the tested party was supported and it is clarified that such change only affects the information of the administrative services transaction, since the transfer pricing methods apply to individual transactions, as determined by article 260-2 of the Tax Statute. … In this context, the plaintiff could correct its DIIPT and its supporting documentation, the information submitted in its corrections should have been taken into account, the plaintiff was free to choose to carry out its analysis of the foreign company, and it complied with the requirements of its supporting information together with the arm’s length principle. Consequently, the contested measures should be annulled, and the other pleas in law are dismissed as the main plea is well founded.” Click here for English translation Click here for other translation ...

By judgment of 19 January 2021, the Administrative Court upheld an assessment for FY 2012-2017 issued by the tax authorities on the determination of the arm’s length income resulting from related party transactions. The tax assessment resulted from disallowed deductions for Intra group services provided under a general administrative, legal and financial assistance contract of 22 October 2012 Costs invoiced for the preparation of consolidated accounts Expenses related to “Technical services” for which no explanations had been provided An appeal was filed by Central Hydroelectric de Bulgari EOOD with the Supreme Administrative Court in which the company stated that the decision of the Administrative Court was incorrect. Judgement of the Supreme Administrative Court The Supreme Administrative Court partially upheld the decision of the Administrative Court. Excerpts “The present Court of Cassation finds the judgment of the ACGC valid and admissible. The argument of the applicant that the same is inadmissible is unfounded in the part in which the RA was confirmed concerning the increase of its financial result for 2012 by an expense of BGN 188 924.92 for the reason “MECAMIDES technical services”, as well as by an expense of BGN 19 724.92 for a technical expertise under invoice No 13519637/12.04.2012 issued by EDF, France. By its appeal to the ACGC, CENTRAL HYDROELECTRIC DE BULGARI EOOD has appealed against the RA in the part confirmed by the decision of the adjudicating authority. Since the act was confirmed in its entirety in the part of the established corporate tax and interest liabilities for 2012 by the decision No 367/09.03.2020 of the Director of the EITD Directorate – Sofia, the first instance court correctly held that the appeal was also lodged against this part of the RA. The appellant has not explicitly specified the amount of the corporate tax liability and interest established by the RA as a result of the above-mentioned increases in the financial result for 2012 and has not stated that it does not contest the act in this part. The arguments in the cassation appeal that the administrative court committed material breaches of the rules of court procedure, consisting, according to the appellant, in the absence of its own reasoning and failure to consider the material breaches of the administrative procedure rules in the audit proceedings alleged in the appeal, are also unfounded.“ “The decision of the ACCC contains sufficiently substantial and detailed grounds to ensure effective cassation review and to enable the party adversely affected by it to defend itself. The fact that the court considered the defendant’s legal conclusions to be correct does not mean that it did not state its own reasons.” Click here for English Translation Click here for other translation ...

Montupet EOOD is a Bulgarian subsidiary in the French Montupet Group which specializes in the production of aluminum components for the automotive industry. In February 2016, the French Group became part of the Canadian LINAMAR Group, which specializes in the manufacture and assembly of components for the automotive industry. The French group and its production facilities (plants in France, Bulgaria, Northern Ireland, Mexico and Spain) retained their core business as part of one of LINAMAR’s five main business areas – light metal casting. Effective 01.01.2017, Montupet SAS and Montupet EOOD entered into a Services Agreement, which canceled a previous agreement of 21.12.2009 in the part concerning the corporate and management services provided. Pursuant to the new agreement, Montupet SAS undertakes to provide Montupet EOOD with business advisory services in various areas such as business strategy and development advice; financial strategy advice; legal advice; human resources strategy advice; pricing advice and price negotiations with global customers; supply chain management assistance and advice; marketing strategy advice; engineering and methods assistance and advice; technical advice; customer contact development. According to the new contract, the pricing mechanism for the services is based on a cost allocation key for the services provided. The revenue authority formed the conclusion that the majority of the services provided by the French company after 01.01.2017 were of a general administrative nature and did not differ significantly in their nature and/or volumes from the services provided to Montupet EOOD under the previous agreement of 21.12.2009. On the basis of the evidence available, no specific additional benefits for the Bulgarian company resulting from the services received in 2017 an going forward could be identified. Furthermore some of the services were not related to the activities of Montupet EOOD, but instead categorized as “shareholder activities” carried out wholly for the benefit of the parent company or other members of the group, which should not be recognised as intra-group services. The tax authorities also disregarded the evidence submitted concerning the market nature of the price of the services in question. An assessment was issued where the deductions for payments under the new service contract had been adjusted based on the arm’s length provisions. Montupet filed an appeal with the Administrative court which was dismissed. An appeal was then filed with the Supreme Administrative Court Judgement of the Supreme Administrative Court The Supreme Administrative Court set aside the decision of the Administrative Court. Excerpts “In the light of the evidence in the case, it is established that the performance of services was agreed between Montupet SAS and Montupet EOOD The NRA Transfer Pricing Manual (fiche 12) states that intra-group services in practice refers to the centralisation of a number of administrative and management services in a single company (often the parent company), which serves the activities of all or a number of enterprises of a group of related parties selected on a regional or functional basis. The provision of such services is common in multinational companies. The concept of intra-group services covers services provided between members of the same group, in particular technical, administrative, financial, logistical, human resource management (HRM) and any other services. According to paragraph 7.5 of the OECD Transfer Pricing Manual for Multinational Enterprises and Tax Administrations (the “OECD Manual”), the analysis of intra-group services involves the examination of two key questions: 1/ whether the intra-group services are actually performed and 2/ what the remuneration within the group for those services should be for tax purposes. Paragraph 7.6 of the OECD Guidance states that, under the arm’s length principle, whether an intra-group service is effectively performed where an activity is carried out for one or more group members by another group member will depend on whether the activity provides the group member concerned with an economic or commercial benefit to improve its trading position. This can be determined by analysing whether an independent undertaking on comparable terms would have been willing to pay for the activity if it had been carried out for it by an independent undertaking or whether it would only have carried it out with its own funds. In the instant case, it is apparent from the reasoning of the opinion rendered by the revenue authorities and the ultimate conclusion of the trial court that part of the income paid for the services constituted a disguised distribution of profits within the meaning of § 1(5)(b). “a” of the Tax Code and as such subject to taxation under the Tax Code. However, the contested decision does not set out any specific considerations in this respect, and there is no analysis of the type of services performed, the actual performance of those services, and the manner in which the remuneration for the services was priced. On the other hand, the conclusion of the revenue administration, which is fully accepted by the national court, that part of the income is not taxable under Article 195(1)(b) of the Code of Conduct. 1 of the Income Tax Act, as well as the impossibility of determining the exact amount of the income falling within the scope of Article 12 of the Income Tax Act is unjustified, as it remains unclear what part of the income earned should not be taxed under Article 195(1) of the Income Tax Act. 1 of the Income Tax Act, respectively do not fall within the scope of the DTT. In the course of the administrative appeal, as well as in the course of the court proceedings, the foreign company submitted evidence, including a list of corporate services for 2017, documentation of Linamar’s transfer pricing for fiscal 2017, a cost allocation statement, evidence of specific benefits received in relation to the services provided, as well as a statement of business trips made by employees of other companies in the Montupet Group in the city of Montupet. Ruse for 2017. Thus, the documents listed were not discussed by the first instance court, leaving unclarified the circumstances concerning the actual performance of the intra-group services, their direct and long-term effect and, accordingly, ...

CCompany A was active in the management and administration of trusts and companies; related advice and services. A held 99% of the shares in E, a Seychelles-based company. This subsidiary acted as a sub-contractor for company registrations and corporate affairs in the Seychelles. A and E had entered into a service contract dated 6 February 2009 under which the subsidiary provided these services to A. Following an audit, tax assessments were issued for the tax years 2009 – 2012, in which the tax authorities (AFC-GE) had attributed a percentage of 5% of E’s expenses as the maximum allowable remuneration for the activities of the subsidiary. The remainder was added back to A’s taxable income. An administrative appeal was lodged against these tax assessments, but the appeal was later dismissed in 2016. A then appealed to the Administrative Court (TPAI), which, by judgment of 18 December 2017, upheld A’s appeal and annulled the assessments and fines. The tax authorities appealed to the Court of Justice. Judgment of the Court The Court of Justice overturned the decision of the Administrative Court and ruled in favour of the tax authorities. Excerpt “6. a. Implementation of the arm’s length principle presupposes identification of the market value of the asset transferred or the service rendered. Where there is an open market, the prices on that market are decisive and allow for an effective comparison with the prices applied between associated companies (ATF 140 II 88 recital 4.2 and the references cited therein). b. If there is no free market allowing an effective comparison, then the method of comparison with a comparable transaction (or comparable price method) should be used, which consists of making a comparison with the price applied between third parties in a transaction with the same characteristics, i.e. taking into account all the decisive circumstances (BGE 140 II 88 recital 4.2; 138 II 57 recital 2.2; Federal Court ruling 2C_674/2015 of 26 October 2017 recital 7.2). This method corresponds to the comparable open market price method presented in the OECD principles (n. 2.13 et seq.). For this method to be applicable, the transaction with a third party or between third parties must be similar to the transaction under review, i.e. it must have been entered into in circumstances comparable to those of the transaction under review. However, the notion of “comparable transaction” is not easy to define. The relevance of the comparison with transactions concluded with third parties presupposes that the determining economic circumstances of these transactions are similar to those of the transaction under review (OECD principles, n. 1.33 et seq.). The comparability of transactions is determined according to their nature and in the light of all the circumstances of the particular case. If the relevant economic conditions differ from those of the transaction under review, adjustments must be made to eliminate the effects of these differences (OECD principles, 1.33 et seq.). However, it cannot be entirely ruled out that a comparable transaction would not have been concluded at the market price, since the formation of the price may be influenced by several factors, such as market conditions, contractual terms (for example, the existence of secondary services, the quantity of goods sold, payment terms), the commercial strategy pursued by the third-party purchaser or the economic functions of the parties. Nevertheless, the price charged in a comparable transaction is presumed to correspond to the market price; in the event of a dispute, the burden of proof to the contrary lies with the company (Federal Court ruling 2C_1082/2013 of 14 January 2015, para. 5.2 and the references cited). c. In the absence of a comparable transaction, the arm’s length price is determined using other methods, such as the cost plus method. This method consists in determining the costs incurred by the company providing the service, to which an appropriate margin is added in order to obtain an appropriate profit taking into account the functions performed and the market conditions (ATF 140 II 88 rec. 4.2 p. 94; judgment of the Federal Court 2C_11/2018 of 10 December 2018 recital 7.4). d. A concealed distribution of profits also presupposes that the unusual nature of the benefit was recognisable by the company’s governing bodies. This condition is presumed to have been met if the disproportion was clearly recognisable. In this respect, reference should be made to the case law and doctrine developed in private law concerning the imputation of knowledge of the corporate bodies to the legal person, which holds that this imputation does not apply in an absolute manner, but that it must only come into play for what is known to the body that is at least seized of the matter, or else when the information acquired by one body has not been passed on to another body, due to a defect in the organisation of the company (Federal Court ruling 2C_1082/2013 cited above, rec. 6.1 and references cited). 7. It is up to the taxing authority to establish the facts on which the tax claim is based or which increase it, whereas the taxpayer must allege and prove the facts which eliminate or reduce this claim, these rules also applying to proceedings before the appeal authorities (ATF 140 II 248 recital 3.5). In tax reminder and fine proceedings, the tax authority must prove that the assessment is incomplete (Federal Court ruling 2C_342/2017 of 12 April 2018, recital 4.1). In the area of services that can be valued in money, the tax authorities must prove that the company has provided a service and that it has not received any consideration or has received insufficient consideration. If the evidence gathered by the tax authorities provides sufficient indications of the existence of such a disproportion, it is then up to the taxpayer to establish the accuracy of his allegations to the contrary (ATF 138 II 57 rec. 7.1 p. 66; Federal Court ruling 2C_814/2017 cited above, para. 8.1.3). Moreover, once a fact is considered to be established, the question of the burden of proof no longer arises ...