A local manufacturer – BASF Argentina S.A. – belonging to the German multinational group – BASF – specialized in chemical products which it produced and sold. For these activities it used imported and national inputs that it transformed through licensed industrial procedures owned by companies of the same group. It had signed 6 technology transfer and trademark use license agreements (CTT) with three related companies, under which it paid a fee for the sale of products manufactured in the country with the licensed technologies and trademarks. BASF Argentina S.A. also imported finished products with the same brands, but only for resale in the country. It claimed that no royalties were paid for these products. The customs authority objected to the non-inclusion of royalties in the import value. Judgement of the Tax Court The Court found that the royalties paid were also part of the value of the imported goods. Excerpt “…In this state of affairs, it is clear that the percentages of 99%, in both charges, allow to conclude, with a reasonable degree of certainty, that the universe of import shipments whose value adjustment was challenged and subject of the proceedings, correspond to inputs acquired from companies of the same economic group whose corporate name includes the name “BASF”, so it is in line with reality to induce that such products carry the ”BASF” technology and, therefore, the “BASF” brand of its manufacturer. And it is precisely the circumstance of inseparability which adds commercial value to the product, bringing certainty to the consumer as to the production process involved in its manufacture. Indeed, over the four years under study, the inputs imported by the plaintiff have been manufactured by more than thirty different companies, located in different parts of the world, which share the characteristic of including the name “BASF” in their corporate name. From this perspective, it is unequivocal that the inputs are manufactured with BASF’s intellectual property and licensed to the Argentine buyer, who, when acquiring them, necessarily imports the product plus the intangible (BASF trademark), guarantee of the manufacturing technology of the tangible. This hypothesis is reinforced by an analysis of the absurd: it is contrary to all logic to suppose that BASF Argentina carries out in 4 years more than 14,000 purchases from more than 30 BASF suppliers all over the world, of inputs manufactured by them, and to suppose that all of them do not have in their real implicit commercial value the BASF technology that assures the buyer – BASF ARGENTINA – a certain quality/prestige/guarantee that comes with knowing, precisely, that it was manufactured by the BASF economic group. And it is this added value that corresponds to the denomination “brand”. In view of the foregoing, the tax representatives are right when they state, in relation to the non-connection maintained by the plaintiff, that what is said does not reflect the commercial reality of the economic group since, according to the declaration of the import dispatches analysed above, the companies supplying the products bear the word “BASF” in their names, from which it is reasonably certain that they would form part of the same economic group with BASF ARGENTINA S. A. A. And, it is worth noting that this conclusion was not undermined by the appellant with evidence sufficiently convincing to remove all doubt. In short, in order for imported inputs to be entitled to a certain intangible, they do not need to be subjected to any industrial process in the national territory, since such circumstance involves another type of taxable event. On the other hand, the generating event in question refers to the importation of goods for consumption for an indefinite period of time; and everything that forms part of the product that enters through customs will form part of the taxable value. Thus, neither the process to which the product was subjected abroad -whose consequence does affect the taxable value of the imported good- nor the process that could affect it while nationalised is under discussion; only the state of the product at the time the HI is perfected, i.e. at the time of release for free circulation -regular imports- is of interest. In short, it is concluded that all the transactions carried out by BASF ARGENTINA and for which it imported BASF branded inputs, must include in the taxable value the real value of the product, understood as the aggregate of the tangible and intangible value. …” Click here for English Translation Click here for other translation ...