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Recharacterization of Intra-Group Commodities Transactions
Review of Case Glencore Investment Pty Ltd v. Commissioner of Taxation of the Commonwealth of Australia
The case discusses the “restructuring” of a contract between an Australian subsidiary (taxpayer) and its Swiss parent for the sale of copper concentrate of a mine located in Cobar, New South Wales, Australia, by the Australian tax administration. The decision discusses the recharacterization of transactions in light of the Australian domestic law as well as the OECD Transfer Pricing Guidelines applicable to the case (i.e., the 1995 Guidelines), also considering the previous decisions in the Australian case Chevronand the Canadian case Cameco. In the end, the taxpayer succeeded in Court to defend form and substance of the intra-group agreements.
1. Facts
The Glencore group, one of the world leaders in the natural resources industry, acquired the CSA mine in Cobar, in the region of New South Wales, Australia, in 1998. After some start-up work, the mine became operational in 1999 and, since then, has been operated by Cobar Management Pty Ltd (hereinafter: CMPL), a subsidiary of the Glencore group.
Since the beginning of the operation of the mine, all the copper concentrate produced in the CSA mine has been sold by CMPL to its parent, Glencore International AG (hereinafter: Glencore), a t...