Summary: 1. Cases i. India: BMW - Delhi Income Tax Appellate Tribunal - Another "L.G. Electronics - type case" concerning excessive advertising, marketing, and promotion (AMP) expenditure - BMW India characterized as a full-fledged distributor - BMW India's AMP spend (3.62%) was higher than the mean of its comparables (1.99%) - Tribunal rejected tax authorities' argument that the excess AMP spend should be charged, with a mark-up, to legal owner of intangibles (BMW Germany) - Reason: BMW India was far more profitable (gross profit margin and net profit margin) than the comparables. Thus, BMW India was already being compensated for its higher AMP spend ii. India: Shell - Ahmedabad Income Tax Appellate Tribunal - Definition of "fees for technical services" (FTS) in India / Netherlands treaty contains a condition that services "make available" technical knowledge, experience, skill, etc. - Shell Netherlands and Shell India entered into a 10 year contract under which Shell Netherlands is required to provide various technical or consulting services to Shell India - Tribunal asked the tax authorities to investigate whether, in light of the long term (10 years) of the contract, expertise and skills were obtained by employees of Shell India 2. China: 2012 APA Report • As at 31 December 2012: cumulative total of APAs signed is 85 • In 2012, 12 APAs were signed (3 unilateral, 9 bilateral) • 9 bilateral APAs signed in 2012 - 5 with Asian countries - 1 with European country - 3 with North American countries • As at 31 December 2012: the SAT had 79 APA requests that were yet to be officially accepted 3. China: other developments i. Late filing costs Finnish company - Finnish company undertook corporate reorganization which satisfied all of the conditions for reorganization relief – except that it did not file forms on time - Reorganization relief was denied, causing a liability for tax, and interest of nearly USD2 million ii. Qianhai Shenzhen – Hong Kong Modern Service Industry Co-operation Zone - Tax subsidy for foreign highly-talented workers - The subsidy will ensure that the effective tax rate on employment income is 15% 4. 22 August: the day when nothing happened • Direct Taxes Code Bill was intended to be presented to the Indian Cabinet on 22 August • However, this did not occur, due to the concern that the new 35% individual income tax rate (for high income taxpayers) might not be a good idea, "given the depressed economic sentiments" at the current time • The Bill reportedly contains a definition of "substantially", for the purposes of the taxation of indirect share transfers under section 9(1)(i): more than 20%!
