Tax Treaty Case Law around the Globe 2022
1. Aufl. 2023
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12.1. Introduction
The Supreme Administrative Court of Finland delivered its decision in case KHO 2021/346 (66) on 21 May 2021. In this case, the Court had to rule on whether the arm’s length interest rate of an intra-group loan can be determined on the basis of the cost-plus method using the average margin of the taxpayer’s external financing costs as the reference.
12.2. Facts
The taxpayer, A Oyj, is a Finnish listed company and is the parent company of a multinational group. A Oyj acted as the centralized financing company of the group. A Oyj raised funds from external sources and on-lent the funds to its subsidiaries. The subsidiaries were prohibited from obtaining external financing in their own name.
The dispute concerned a Russian subsidiary, ZAO C, which was wholly owned by a Finnish company, D Oy. D Oy and B Oy were wholly owned subsidiaries of A Oyj. A Oyj raised funds from outside the group and lent the funds to B Oy, which, in turn, lent those funds to ZAO C. The interest on the loans granted to ZAO C was determined based on the cost of A Oyj’s external financing. The interest included a margin that was determined based on the average margin of A Oyj’s external financing co...