Repetition is the Mother of Wisdom
27.12.2011Company: Amcham
We deal with it all the time. Again and again. Those who have experienced making transactions with our assistance know it very well. What are the tax implications of separate transactions? Could they lead to tax savings? Are we entitled to them? Will local or national authorities take the savings away from us?
Every time restructuring or change regarding a transaction takes place, we repeat: "If you claim a tax benefit, you can expect the Tax Authority to ask about your commercial reasons.“ Be prepared. In our experience an overwhelming majority of transactions are not (at least not only) motivated by tax savings. However, you should be ready to answer the questions you will probably be asked. This has been recently approved by the European Court of Justice.
In the Foggia case the ECJ decided that the Portuguese Tax Authority was right to refuse the transaction of tax losses accumulated in the holding. Foggia reported a tax loss transaction as a consequence of a merger whilst it performed no business activity except for being a shareholder in other companies which are members of the holding. The Tax Authority therefore arrived at a conclusion that there was no clear commercial reason for the acquisition and refused the tax loss.
From time to time, it is good to repeat the things we already know.
Daniel Kovačovič
RSM TACOMA TAX
Consultant
daniel.kovacovic@rsm-tacoma.cz
