Tag: Transfer of intangibles

Denmark vs “IP ApS”, March 2023, Tax Tribunal, Case No. SKM2023.135.LSR

The case concerned the valuation of intangible assets transferred from a Danish company to an affiliated foreign company. The Tax Tribunal basically agreed with the valuation of the expert appraisers according to the DCF model, but corrected the assumptions with regard to revenue growth in the budget period and the value of the tax advantage. Finally, the Tax Tribunal found that the value of product Y should be included in the valuation, as all rights to product Y were covered by the intra-group transfer. Excerpts “It was the judges’ view that the turnover growth for the budget period should be set in accordance with Company H’s own budgets prepared prior to the transfer. This was in accordance with TPG 2017 paragraphs 6.163 and 6.164 and SKM2020.30.LSR.” “With reference to OECD TPG section 6.178 on adjustment for tax consequences for the buyer and seller and SKM2020.30.LSR, the National Tax Tribunal ruled that the full value of the buyer’s tax asset should be added to the value of the intangible assets when valuing according to the DCF model.” Click here for English translation Click here for other translation SKM2023-135 LSR ORG ...

France vs Bupa Insurance, December 2022, Conseil d’État, Case No 450796 (ECLI:FR:CECHR:2022:450796.20221221)

In 2009 a British company – Bupa Insurance Limited – absorbed the Danish company International Health Insurance, whose shares it had acquired in 2005 and which had had a French branch since 1993. Following an audit for FY 2009 and 2010, the tax authorities considered that the French branch had passed on to Bupa Insurance Limited, free of charge, the customers associated with its insurance business in France, and considered this transaction to be an indirect transfer of profits within the meaning of Article 57 of the General Tax Code. The Administrative Court of Appeal set aside the assessment and an appeal was then filed with the Conseil d’État by the tax authorities. Judgement of the Supreme Administrative Court The Supreme Administrative Court upheld the decision from the CAA and dismissed the appeal of the tax authorities. Excerpts “3. It is clear from the statements in the judgment under appeal that the Marseille Administrative Court of Appeal held that the French branch of the Danish company International Health Insurance bore the operating risk of the insurance business carried out in France prior to 1 January 2009, but noted that prior to that date, the insurance contracts offered by this branch were governed by Danish law and did not benefit from any particular adaptation to the French situation, and that all the services offered to the insured parties, in particular the assistance service, were provided in Denmark, that the contracts concluded with the insurance brokers responsible for canvassing on French territory were partly concluded by the Danish company, that nothing in the file established that the employees of the French branch had the function of developing their own clientele for the benefit of the branch, and that the registration of French clients according to a specific quotation, although it allowed for an accounting analysis specific to clients who had concluded contracts with brokers operating on French territory, did not demonstrate that the activity of the branch would have consisted of developing such a client base. The Court deduced from these findings that the Minister did not establish that this branch had real commercial autonomy before 1 January 2009 and, consequently, the existence of a free transfer of customers leading to the presumption of an indirect transfer of profits to the British company Bupa Insurance Limited. 4. By ruling, in the light of the factors mentioned in point 3, which it assessed in a sovereign manner, that, since the French branch of the Danish company did not have genuine commercial autonomy, the fact that it had borne the operating risk inherent in the insurance business carried on in France prior to 1 January 2009 was not sufficient to establish the existence of its own customer base, In order to deduce that no free transfer of clientele, likely to characterise an indirect transfer of profits within the meaning of Article 57 of the General Tax Code, had been established, the Marseille Administrative Court of Appeal, which ruled in a sufficiently reasoned and uncontradicted judgment, did not commit an error of law or incorrectly characterise the facts before it. 5. It follows from the foregoing that the Minister has no grounds for seeking the annulment of the judgment which he is challenging. “ Click here for English translation Click here for other translation France vs Bupa Insurance Limited December 2022 Conseil d'État Case no 450796 ...

Switzerland vs A AG, September 2021, Administrative Court, Case No SB.2020.00011/12 and SB.2020.00014/15

A AG, which was founded in 2000 by researchers from the University of Applied Sciences D, has as its object the development and distribution of …, in particular in the areas of ….. It had its registered office in Zurich until the transfer of its registered office to Zug in 2021. By contract dated 16 June 2011, it was taken over by Group E, Country Q, or by an acquisition company founded by it for this purpose, for a share purchase price of EUR …. On the same day, it concluded two contracts with E-Schweiz AG, which was in the process of being founded (entered in the Commercial Register on 7 September 2011), in which it undertook to provide general and administrative services on the one hand and research and development on the other. As of 30 September 2011, A AG sold all ”Intellectual Property Rights” (IPR) and ”Non-Viral Contracts” to E-Company, a company in U with tax domicile on the island of V, for a price of EUR … for the IPR and EUR … for the ”Non-Viral Contracts”. A AG had neither identifiable operating activities nor personnel substance in the financial year from 01.10.2011-30.09.2012 following the shareholding transaction. The transfer of the tangible and intangible business assets and the personnel of A AG to other companies of the E group corresponded to an integration plan that had already been set out in a draft power point presentation of the E group prior to the acquisition of the shares. Following an audit the tax authorities issued an assessment for additional taxable net profit for the tax period 01.01.-30.09.2011 for state and communal taxes and direct federal tax, as well as taxable equity of CHF … for state and communal taxes. The assessed taxable net profit included a hidden profit distribution from the sale of the IPR and customer relationships to the E-Company. The calculations of profits was made as a discretionary estimate. An appeal was filed by A AG with the tax court which was dismissed with respect to the calculations of profits due to the sale of intangible assets at a lower price, but were upheld with respect to the transfer of functions. An appeal was then filed with the administrative court by both A AG and the tax authorities. A AG requested that the assessment of the Tax Office be dismissed with costs and compensation. The Tax Office requested the dismissal of the complaints of the obligated party and the annulment of the decision of the Tax Appeal Court and confirmation of the objection decisions with costs to be borne by the obligated party. Judgement of the Administrative Court The court ruled in favour of the tax authorities and remanded the case to the court of first instance for recalculation. Excerpts “The subject matter of the proceedings are reorganisation measures carried out after the change of shareholders, which were connected with the sale of assets of the obligated party to other group companies and the abandonment of traditional operating activities. The dispute revolves around the question of whether the obligated party provided services to related companies under conditions that do not comply with the principles of tax law regarding the appropriateness of performance and consideration between related parties and whether it therefore provided non-cash benefits or hidden profit distributions that are subject to profit tax.” “According to the correct findings of the Tax Appeals Court, to which reference can be made, the large discrepancy between the values according to the transfer price study of company I and the share purchase price and the result of the PPA was suitable to cast doubt on the correctness of the transfer price study. Even if the objections to the comparability with the PPA were true, the relevance of the PPA (wrongly disputed by the obligated party) could not be verified without the data used in its preparation. The share purchase price was agreed among independent third parties and therefore corresponded to the enterprise value at the time of the acquisition of the shareholding. According to the findings of the lower court, the transfer price study was only subsequently prepared in 2012 and is incomplete in various respects, which was not refuted by the obligated party. The Tax Appeals Court therefore concluded that the requirement had not been fulfilled and that the facts of the case had remained unclear. In particular, there had been uncertainty about the actual value of the intangible rights sold after the investigation had been completed. The Cantonal Tax Office’s assertion that the agreed purchase price for the intangible rights was too low had not been refuted and, based on the comparison with the PPA and the share purchase price, this assertion appeared very likely. The Cantonal Tax Office had therefore provided the main evidence incumbent upon it. Because the cantonal tax office had not been able to carry out its own valuation due to the lack of data, it had rightly proceeded to an estimate. According to the decision of the lower court, the discretionary assessments regarding the profit from the sale of the intangible assets were rightly made.” “Moreover, the burden of proving the obvious incorrectness of the discretionary assessment is placed on the taxpayer, which is not to be equated with a “reversal of the burden of proof” (on the whole Zweifel/Hunziker, Kommentar StHG, Art. 48 N. 44; diesel, Kommentar DBG, Art. 132 N. 37; Zweifel et al., Schweizerisches Steuerverfahrensrecht, § 20 Rz. 22).” “An estimate is “obviously incorrect” if it cannot be objectively justified, in particular if it is recognisably motivated by penalties or fiscal considerations, if it is based on improper bases, methods or aids for estimation or if it cannot otherwise be reasonably reconciled with the circumstances of the individual case as known from the experience of life. Obviously incorrect is therefore an estimate that is based on an abusive use of the estimation discretion, i.e. is arbitrary (Zweifel/Hunziker, Kommentar StHG, Art. 48 N. 59; dieselben, Kommentar DBG, Art. 132 N ...

France vs SA Sacla, February 2020, CAA de Lyon, Case No. 17LY04170

SA Sacla, a French company trading in protective clothing and footwear, as well as small equipment, was audited for fiscal years 2007, 2008 and 2009. The French tax administration issued an assessment, considering that SA Sacla by selling brands owned by it for an amount of 90,000 euros to a Luxembourg company, Involvex, had indirectly transfered profits abroad. Due to inconclusive results of various valuations presented by the tax authorities and the taxpayer, an expert opinion was ordered by the Court on the question of whether the price of the brands sold by SA Sacla to the company Involvex had been at arm’s length. DECIDES: Article 1: Before ruling on the request of SA SACLA, an expert will carry out an assessment in order to determine whether the selling price of the brands sold by SA SACLA corresponds to their value, taking into account the exemption payment of royalties for a period of 5 years granted by the company Involvex to SA SACLA. Click here for translation CAA_de_LYON_5ème_chambre_13_02_2020_17LY04170_Inédit_au_recueil_Lebon ...