In January 2013 the Swiss company Normet International Ltd acquired all the shares in the Norwegian company Dynamic Rock Support AS (now Normet Norway AS) for a price of NOK 78 million. In February 2013 all intangibles in Dynamic Rock Support AS was transfered to Normet International Ltd for a total sum of NOK 3.666.140. The Norwegian tax authorities issued an assessment where the arm’s length value of the intangibles was set at NOK 58.2 million. The Court of Appeal upheld the tax assessment issued by the tax authorities and rejected the appeal. Click here for translation ...

The question in the case was whether Cytec Norway KS (now Allnex Norway A/S) had paid an arm’s length price for an intra-group transfer of intangible assets in 2010. Cytec Norway KS had set the price for the accquired intangibles at NOK 210 million and calculated tax depreciations on that basis. The Norwegian tax authorities found that no intangibles had actually been transferred. The tax Appeals Committee determined that intangibles had been transferred but only at a total value of NOK 45 million. The Court of appeal upheld the dicision of the Tax Appeals Committee, where the price for tax purposes was estimated at NOK 44.9 million. Click here for translation ...

Following an audit of “Cyprus Corp” for FY 2011, the tax authorities found that the intra-group purchases worth 6.363.281,83 € for mechanical and medical equipment from a group company in Cyprus, were overpriced by 3.833.503,78 €. Corporate taxation i Cyprus is significantly lower than in Greece. Hence, the overpricing resulted in the Cyprus Corp having technically increased its (high) tax depreciation in Greece and (low) tax profits in Cyprus, which in combination resulted in a lower overall tax payment of the group. An revised tax assessment – and a substantial fine – was issued by the tax authorities. Cypres Corp filed an appeal. Judgement of the Court The court predominantly decided in favor of the tax authorities. “Because, during the financial period 1/1-31/12/2011, Mr K. is a shareholder in the applicant company with a 22.81% share, chairman and managing director until 23/08/2011 and from 30/06/2010 to 01/11/2012 the sole shareholder of the Cypriot company ” “, with the result that the transacting companies in the present case are linked by a direct relationship of direct material management, financial dependence and control. Because, the amount of 135.471,48 € declared as accounting difference with the amended Income Tax Return for the financial period 01/01/2011 – 31/12/2011 with the number and date of filing 29/05/17 in application of the provisions of Law 4446 /2016, relates to part of the total amount of depreciation of EUR 194,077.55, which the applicant carried out on the fixed assets purchased from the Cypriot company ” “, as stated in the relevant partial income tax audit report of D. O.Y.A. PATRON and is apparent from the documents No 5 and 7 lodged with the appeal, namely (over-invoicing/ value of purchases from the Cypriot company x total depreciation: € 3 833 503,78/ € 6 363 281,83 = 60,24 % X € 322 174,55 = € 194 077,95). Since the purchases of the applicant company from the Cypriot company ” “, relate to fixed capital goods on which depreciation is carried out and were not deducted as expenditure from the gross income for the financial year 2011, the profit within the meaning of paragraphs 1 and 2 of Article 39 of Law No 2238/1994 is made through the depreciation carried out each year on fixed assets worth € 6,363,281.83. The fifth (fifth) plea of the applicant company is therefore accepted, all the others being rejected.” Click here for English translation Click here for other translation ...

Following an audit of “Cyprus Corp” for FY 2011, the tax authorities found that intra-group purchases worth 5.947.034,44 € for mechanical and medical equipment from a related company in Cyprus, were overpriced by 3.693.150,15 €. Corporate taxation i Cyprus is significantly lower than in Greece. Hence, the overpricing resulted in the Cyprus Corp having technically increased its (high) tax depreciation in Greece and (low) tax profits in Cyprus, which in combination resulted in a lower overall tax payment of the group. An revised tax assessment – and a substantial fine – was issued by the tax authorities. Cypres Corp filed an appeal. Judgement of the Court The court predominantly decided in favor of the tax authorities. “Because, in the financial period 1/1-31/12/2011 Mr. is a shareholder in the applicant company with a 28.18% share, and from 30/06/2010 to 01/11/2012 the sole shareholder of the Cypriot company ‘……. “, with the result that the transacting undertakings in the present case are linked by a relationship of direct and substantial management, economic dependence and control. Because, the amount of 156.920,37 € declared as accounting difference with the amended Income Tax Return for the financial period 01/01/2011-31/12/2011 with the number of the first day and date of filing 29/05/17 in application of the provisions of Law No. 4446/2016, relates to part of the total amount of depreciation of 176.684,43, which the applicant carried out on the fixed assets purchased from the Cypriot company ‘………. “, as stated in the relevant partial income tax audit report of the D.O.Y.A. PATRON and as shown in the documents No 5 and 7 filed with the appeal, namely (Over-invoicing/value of purchases from the Cypriot company x total depreciation: € 3,693,150.15/ € 5,947,034.44 = 62.1 % X € 284,515.99 = € 176,684.43). Since the applicant company’s purchases from the Cypriot company ‘………. “, relate to fixed capital goods on which depreciation is carried out, and were not deducted as expenditure from the gross income for the financial year 2011, the profit within the meaning of paragraphs 1 and 2 of Article 39 of Law No 2238/1994 is made through the depreciation carried out each year on fixed assets worth € 5,947,034.44. The fifth (5th) plea of the applicant company is therefore accepted, all the others being rejected. Since, as regards the fine under Article 39(7) of Law No. 2238/1994, the Act imposing the fine No. /2017 was correctly imposed and is confirmed.” Click here for English translation Click here for other translation ...

Tax depreciation for wind turbines presupposes economic ownership of the asset. A change in economic ownership requires that any risks are transferred to the purchaser/customer. The German Supreme Tax Court held that economic ownership of an asset is not transferred at the time it generates income but rather when the risk of accidental destruction and accidental deterioration of the asset passes to the buyer. The contractual agreements to that effect are crucial. A German partnership (KG) operated a wind farm consisting of five wind turbines. Each wind turbine on a farm is a separate asset which is to be depreciated, or amortised, separately. In December 2003 the KG entrusted a GmbH with the turnkey construction of the turbines. The purchase price was payable in installments. The GmbH in turn engaged another company with delivery and installation of the wind turbines and also to take them into operation. According to the contract, the risk of accidental destruction and accidental deterioration of the turbines should not pass before installation was completed. The turbines were first put into operation in November 2004. In September 2005 the wind turbines were inspected and accepted by the GmbH. The KG wished to depreciate the turbines from November 1, 2004 based on a useful life of 16 years. The tax office declined and demanded depreciation to begin from September 2005. This was confirmed by the Supreme Tax Court. Although possession of the turbines was with the KG as early as November 2004 and the KG took advantage (use) of the turbines already from that day, the underlying insurance contract provided coverage to start not before acceptance of the turbines. The court went on to point out that the supplier of the asset still had to bear the risks until final acceptance, namely in the event of technical problems which might occur during the trial operation of the wind turbines. That payment of the full purchase price was made as early as December 2004 did not have an impact on the economic ownership and hence not influence the judgment of the court. Click here for English translation Click here for other translation ...