For the purpose of determining whether a Swiss Corporation had effektivly been managed from the Netherlands or had a permanent establishment in the Netherlands, the Dutch tax authorities send a request for information. The Swiss Corp was not willing to answere the request and argued that the request was disproportionate and that the concepts of “documents concerning decision-making with regard to important decisions” and “e-mail files” was and did not fit into the powers that an inspector has under Article 47 of the AWR. The court ruled in favor of the tax authorities. The court did not find the tax authorities’ request for information disproportionate. Article 47 of the Awr requires the provision of factual information and information that may be relevant to taxation with respect to the taxpayer (cf. Supreme Court October 20, 2017, ECLI: NL: HR: 2017: 2654). In the opinion of the court, the defendant remained within those limits with his request to claimant to provide access to the entire, original administration in the broadest sense (see 1.6). In addition, a broad range of starting points with regard to the subjective tax liability of the plaintiff also justifies a broad question in this case. The court passed the claim that requesting access to “documents concerning decision-making on important decisions” and “e-mail files” was open to multiple interpretations. However, in the view of the court, the mere circumstance that a request for information left some room for interpretation did not mean that it was not in accordance with the powers that the inspector has pursuant to Article 47 of the AWR. Click here for other translation ...

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 the decision and affirmed that: (i) the terms to challenge the reimbursement initially granted after automated controls had not expired, (ii) Agusta Holding BV was not tax resident in the Netherlands since its directors resided in Italy and in the UK and (iii) Agusta Holding BV did not perform any economic activity in the Netherlands. This decision was then appealed by Augusta Holding to the Supreme Court. The Supreme Court rejected the decision of the Regional Tax Court and held that the place of effective management of Agusta Holding BV was located in the Netherlands, where meetings of the board of directors physically took place and where the company had dedicated premises where management activities were conducted. Click here for English translation Click here for other translation ...

A finance company registered in Guernsey was found to have effective place of management in Switzerland due to lack of functional substance in Guernsey. The Swiss Federal Supreme Court stated that the effective place of management is to be distinguished from the activity of the Board of Directors and the General Assembly and from mere administrative activity, such as accounting. Thus, the effective place of management of a company is where the company has its economic center. Management of the ongoing business in the context of the purpose of the company is decisive, including the decisions made in relation to the core business. According to the Federal Supreme Court, the only business of X Ltd was forwarding the start-up capital provided by Y Holding AG in the form of loans to Group companies. X Ltd activities in Guernsey were of a purely administrative nature, and in the exclusive interest of Y Holding AG. The decisions on the respective lending activities was made by the management of Y Holding AG in Switzerland. The low rent of the business premises in Guernsey, low telephone costs, and just two part-time employees with low pay supported the fact that the effective place of management was located in Switzerland and not in Guernsey. Click here for translation ...

Tradehold is an investment holding company, incorporated in South Africa, with its registered office at 36 Stellenberg Road, Parow, Industria, and is listed on the Johannesburg Stock Exchange. During the tax year under consideration, being the year of assessment ended 28 February 2003, Tradehold’s only relevant asset was its 100 per cent shareholding in Tradegro Holdings which, in turn, owned 100 per cent of the shares in Tradegro Limited, a company incorporated in Guernsey which owned approximately 65 per cent of the issued share capital in the UK-based company, Brown & Jackson plc. On 2 July 2002, at a meeting of Tradehold’s board of directors in Luxembourg, it was resolved that all further board meetings would be held in that country. This had the effect that, as from 2 July 2002, Tradehold became effectively managed in Luxembourg. It nevertheless remained a ‘resident’ in the Republic notwithstanding the relocation of the seat of its effective management to Luxembourg by reason of the definition, at that time, of the term ‘resident’ in s 2 of the Act. This status changed with effect from 26 February 2003, when the definition was amended and Tradehold ceased to be a resident of the Republic. Relying on the provisions of para 12 of the Eighth Schedule to the Act, the Commissioner contended that when the respondent relocated its seat of effective management to Luxembourg on 2 July 2002, or when it ceased to be a resident of the Republic on 26 February 2003, it was deemed to have disposed of its only relevant asset, namely its 100 per cent shareholding in Tradegro Holdings, resulting in a capital gain being realised in the 2003 year of assessment in an amount of R405 039 083. This tax is colloquially referred to as an ‘exit tax’. Article 13(4) of the DTA provides as follows: ‘Gains from the alienation of any property other than that referred to in paragraphs 1, 2 and 3, shall be taxable only in the Contracting State of which the alienator is a resident.’ The Tax Court rejected the Commissioner’s argument that the reference in Art 13(4) of the DTA to gains from the alienation of property did not include a deemed disposal of property as contemplated in para 12(2)(a) of the Schedule. The Court concluded: DTA, art 13:‘Generally speaking when you talk of a thing being deemed to be something, you do not mean to say that it is that which it is deemed to be. It is rather an admission that it is not what it is deemed to be and that, notwithstanding, it is not that particular thing, nevertheless it is deemed to be that thing.’ Whether the term ‘alienation’ as used in the DTA includes within its ambit gains arising from a deemed (as opposed to actual) disposal of assets: It is of significance that no distinction is drawn in Art 13(4) between capital gains that arise from actual or deemed alienations of property. There is moreover no reason in principle why the parties to the DTA would have intended that Art 13 should apply only to taxes on actual capital gains resulting from actual alienations of property. Consequently, Art 13(4) of the DTA applies to capital gains that arise from both actual and deemed alienations or disposals of property. It follows therefore that from 2 July 2002, when Tradehold relocated its seat of effective management to Luxembourg, the provisions of the DTA became applicable and that country had exclusive taxing rights in respect of all of Tradehold’s capital gains. This conclusion renders it unnecessary to deal with the Commissioner’s other contentions. The Revenue Service had incorrectly included a taxable gain resulting from the deemed disposal of Tradehold’s investment in its income for the 2003 year of assessment. The Court found in favor of taxpayer ...