1. Nestle case 2015 (case #A40-16883/15, in favor of tax authorities)
Nestle Finance International LTD (NFI) & NTC-EUROPE SA (NTC) lended money to Nestle Russia.
Courts decided that:
– real lender is NESTLE S.A. (parent company of Nestle Group)
– NFI & NTC are just conduit companies, used only for proper compliance with the tax law restrictions
and courts applied Article’s 269 of the RF Tax code restrictions for the interest rates on loans.
Facts that implemented the courts decisions that NTC & NFI are just conduit companies:
– NFI & NTC are solely owned by NESTLE S.A. (100% of participation units),
– some members of Boards of Directors of NFI, NTC, NESTLE S.A. are the same;
– Loan agreements with NFI & NTC and amendments were signed at the head office of NESTLE S.A.;
– NFI & NTC were established just for funding and allocation of funds and lending money to Nestle group companies;
– Interest rates in loan agreements and amendments were always on max threshold of Article 269 restrictions;
– NESTLE S.A. forced guarantees on NFI’s borrowings from the 3rd parties;
– balance sheet of NFI was integrated in reporting of NESTLE S.A.;
– NESTLE S.A. supervised NFI’s intragroup loan’s interest rates.
2. Moscommerzbank case 2014/2015 (case #A40-100177/13, in favor of taxpayer)
Facts. Moscommerzbank sold mortgages to Moscow Stars B.V. Moscow Stars B.V. issued secured bonds using mortgages as collateral. Moscommerzbank as service agent of Moscow Stars B.V. was getting money from the borrowers of mortgages (individuals) and transferred to Moscow Stars B.V. Moscow Stars B.V., according to tax authorities opinion, transferred money in transit to the owners on secured bonds.
Tax authorities decided that Moscow Stars B.V. is conduit company, so Moscommerzbank should withheld tax from the money paid by Moscow Stars B.V. to the bond’s owners.
Courts disagreed and decided that:
– there was real business purpose for Moscommerzbank in selling the mortgages to Moscow Stars B.V. (additional liquidity),
– conditions of bonds issued by Moscow Stars B.V. were different from mortgages’ conditions,
– Moscow Stars B.V. had its own substance.
3. Credit Europe Bank (case #А40-11346/12-91-57, in favor of tax authorities)
Bank issued through conduit company CEB Capital S.A. bonds with interest rate 9%, that were purchased by the bank shareholder.
Bank put money on deposits to this shareholder on a regular basis with interest rate 0.5%.
Tax authorities and courts decided that money lended were used by shareholder for purchasing bonds.
So, Bank pays interest rate on bonds 9%, shareholder pays him just 0.5%.
Conduit company evidence:
– bonds and deposits/loans to Bank are the only own assets,
– min local tax payments,
– min account balances,
– min charter capital.
4. Naryanmarneftegas case 2011 (case #A40-1164/11-99-7, in favor of tax authorities)
ConocoPhilips and Lukoil purchased 30% and 70% shares in LLC Naryanmarneftegaz.
Facts. Parent companies signed:
– Framework agreement,
– Joint Venture agreement,
– Inter-creditor agreement,
Chain of subsidiary companies signed
– Loan agreements
Courts decided that all these agreements are like one single contract.
Purpose: financing of Naryanmarneftegaz through the conduit company for tax cuts (lending money through chain of subsidiaries just for proper compliance with the tax law restrictions of Article 269 – thin capitalization rules).