Maersk Oil and Gas A/S (later TotalEnergies EP Danmark A/S) continued to make operating losses, although the group’s combined oil and gas operations were highly profitable. Following an audit of Maersk Oil, the tax authorities considered that three items did not comply with the arm’s length principle. Maersk Oil incurred all the expenses for preliminary studies of where oil and gas could be found, but the results of these investigations and discoveries were handed over to the newly established subsidiaries free of charge. Licence agreements were signed with Qatar and Algeria for oil extraction. These agreements were entered into with the subsidiaries as contracting parties, but it was Maersk Oil that guaranteed that the subsidiaries could fulfil their obligations and committed to make the required technology and know-how available. Expert assistance (time writing) was provided to the subsidiaries, but these services were remunerated at cost with no profit to Maersk Oil. An assessment was issued where additional taxable income was determined on an aggregated basis as a share of profits from the activities – corresponding to a royalty of approximately 1,7 % of the turnover in the two subsidiaries. In 2018, the Tax Court upheld the decision and Maersk Oil and Gas A/S subsequently appealed to the High Court. In 2022, the High Court held that the subsidiaries in Algeria and Qatar owned the licences for oil extraction, both formally and in fact. In this regard, there was therefore no transaction. Furthermore the explorations studies in question were not completed until the 1990s and Maersk Oil and Gas A/S had not incurred any costs for the subsequent phases of the oil extraction. These studies therefore did not constitute controlled transactions. The Court therefore found no basis for an annual remuneration in the form of royalties or profit shares from the subsidiaries in Algeria and Qatar. On the other hand, the Regional Court found that Maersk Oil and Gas A/S’ so-called performance guarantees for the subsidiaries in Algeria and Qatar were controlled transactions and should therefore be priced at arm’s length. In addition, the Court found that technical and administrative assistance (so-called time writing) to the subsidiaries in Algeria and Qatar at cost was not in line with what could have been obtained if the transactions had been concluded between independent parties. These transactions should therefore also be priced at arm’s length. The High Court referred the cases back to the tax authorities for reconsideration. An appeal was then filed by the tax authorities with the Supreme Court. Judgement of the Supreme Court The Supreme Court decided in favour of the tax authorities and upheld the original assessment. The court stated that the preliminary exploration phases in connection with oil exploration and performance guarantees and the related know-how had an economic value for the subsidiaries, for which an independent party would require ongoing payment in the form of profit share, royalty or the like. They therefore constituted controlled transactions. Furthermore, the court stated that Maersk Oil and Gas A/S’ delivery of timewriting at cost price was outside the scope of what could have been achieved if the agreement had been entered into at arm’s length. Finally, the transactions were considered to be so closely related that they had to be assessed and priced on an aggregated basis and Maersk Oil and Gas A/S had not provided any basis for overturning the tax authorities’ assessment. Click here for English translation Click here for other translation ...

In the course of an Austrian tax audit related party transactions between C GmbH, Austria, and D AG (formerly A AG), Liechtenstein, could only be traced on the basis of balance sheets and tax returns of A AG, Liechtenstein. In January 2019, the Austrian Federal Ministry of Finance (BMF), Vienna, therefore submitted a request for information to the Liechtenstein Tax Administration based on Article 25a of the DTA between Liechtenstein and Austria, concluded on 5 November 1969 and in particular as amended by the Protocol concluded on 29 January 2013, LGBl. 2013 No. 433. The ***-group is active in the field of online and direct marketing. The head office of the *** Group is in Vaduz. All intangible assets are owned by D AG in Liechtenstein and include all data (more than 100 million), IP and trademark rights, the servers, essential software, domains and know-how. Sales and marketing are carried out exclusively by C GmbH, which is based in Austria. Marketing includes the brokerage of addresses and services as well as the sending of e-mail and postal addresses to customers. The billing of services from Liechtenstein to Austria mainly involves the transfer of data with advertising consent, as well as the leasing of data with advertising consent and server services. The basis for the charging is a cooperation and marketing contract between D AG and C GmbH and there is indeed a description of the content of the contract. However, it is not clear which of these services were actually provided in the individual years. There is also no description of services that could have been used to determine the market value of the services. In order to be able to apply the arm’s length principle between the two affiliated companies, it is necessary to obtain the relevant balance sheets and tax assessment notices of D AG (formerly A AG). By letter of 24 January 2019, the tax administration informed D AG about the BMF’s request for administrative assistance and that the BMF requested the transmission of the 2014 to 2016 balance sheets and tax returns. D AG submitted several comments where it opposed the transmission of balance sheets and tax returns to the BMF. By order dated 1 July 2020, the Tax Administration decided to provide administrative assistance to the BMF Vienna based on the request of 14 January 2019 regarding 1) C GmbH and 2) A AG. A AG then filed an appeal to the Administrative Court where the main argument of the complainant was that the information requested by the requesting authority, namely the 2014, 2015 and 2016 annual accounts of the complainant and the tax accounts for the tax years 2014, 2015 and 2016, were not needed by the Austrian tax authorities. They were neither necessary, suitable and relevant for the taxation of C GmbH, Dornbirn, nor for the taxation of Mr B, Vaduz (point 1 of the complaint).” The appeal was dismissed by the Administrative Court and an appeal was then filed with the Constitutional Court. Judgement of the Constitutional Court The Court dismissed the complaint of A AG. Excerpts “Furthermore, the question of whether only past data or also developments after the valuation date are to be taken into account for the company valuation can be left open. In any case, the complainant also concedes that later data “could at best be used to check the plausibility of the business plan”. However, this is sufficient as a basis to affirm the probable relevance of the requested data as a prerequisite for the granting of tax office assistance. It is therefore not necessary to go into further detail on this appeal.” “In accordance with this case law, it is not necessary to address the question of the substantive correctness of the considerations in the decision of the Administrative Tribunal challenged here. 4.3 However, it is necessary to address the complainant’s complaint that there is also a mere sham reasoning, insofar as the Administrative Court disregards the essential question of whether the tax assessments were issued as provisional assessments and only refers to the general possibility that an assessment can be made provisionally pursuant to § 200 BAO. This reproach appears justified to the Constitutional Court. However, this is only an additional justification. Primarily, the Administrative Court considers that the requesting authority explicitly states that the tax assessment was carried out “provisionally” with regard to both the transfer prices and the exit taxation and that a final legal assessment was only possible after receipt of the requested documents and information. However, this justification is undoubtedly not a sham, especially since it is also at least free of arbitrariness according to the previous considerations. However, a mere secondary justification in addition to a justification in conformity with the constitution cannot constitute a violation of fundamental rights even if it would be unconstitutional on its own (see CJEU 2018/099, recital 3.1; CJEU 2016/087, recital 4.5 [both www.gerichtsentscheide.li]; CJEU 2005/045, LES 2007, 338 [340, recital 2.6]; see also Tobias Michael Wille, Begründungspflicht, op. cit., 564, para. 24). Accordingly, there is no need to go into further detail on this ground of appeal. 4.4 The appellant’s objection to the statement of reasons therefore also proves to be unjustified. 5 For all these reasons, the complainant has not been successful with any of her fundamental rights objections, so that the present individual complaint must be dismissed in accordance with the order.” Click here for English translation Click here for other translation ...