A dispute regarding tax avoidance

Our tax law experts represent the client in a tax dispute against the tax authorities.

Our client sold shares of a very profitable company, which excavates and processes high-quality raw materials, to his own newly established company for EUR 1.5 million. After this transaction, the newly established company received dividends and paid to the client for the shares. The tax authorities applied general anti abuse rule (GAAR) and considered that the main purpose of the sale of shares was tax avoidance. Thus, the tax authorities taxed the sale of shares as the distribution of dividends.

Since the tax authorities do not have evidence that the sale of the shares was artificial, our tax team is arguing that the GAAR cannot be applicable if the transaction is not wholly artificial arrangement and reflects economic reality.

Even though the tax authorities agreed to reduce calculated taxes by 60% during the ADR, the client did not agree with that. The client is confident with our arguments and expects a victory in the tax dispute before the court.