Germany | Arm's Length Principle | VAT and Customs Valuation | Transfer Pricing | Determination of customs value | Advance pricing agreement

Germany | Arm's Length Principle | VAT and Customs Valuation | Transfer Pricing | Determination of customs value | Advance pricing agreement

***

Contact us and speak with an international tax lawyer: https://yourinternationaltaxlawyers.net

Discover our courses

COURSE 1 TAX HAVENS COURSE - GLOBAL CITIZEN COURSE - BUSINESS INTERNATIONALIZATION COURSE

https://yourinternationaltaxlawyers.net/index.php/course-1

COURSE 2 Learn 10 hidden strategies used by elites and multimillionaires to reduce their taxes, and start saving taxes right NOW, even without moving abroad

https://yourinternationaltaxlawyers.net/index.php/course-2

***

Germany vs “H-Customs GmbH” | Case No VII R 2/19 | Transfer Pricing

Judgment of 17 May 2022, VII R 2/19

Determination of customs value - Cross-border transactions between associated companies - Advance pricing agreement

ECLI:DE:BFH:2022:U.170522.VIIR2.19.0

BFH VII Senate

CC Art 28, EECV 2913/92 Art 28, CC Art 29, EECV 2913/92 Art 29, CC Art 30, EECV 2913/92 Art 30, CC Art 31, EECV 2913/92 Art 31, CC Art 78 para 1, EECV 2913/92 Art 78 para 1, CC Art 201, EECV 2913/92 Art 201, CC Art 214 para 1, EECV 2913/92 Art 214 para 1, CC Art 236 para 1 subpara 1, EECR 2913/92 Art 236 Abs 1 UAbs 1, CCIP Art 143 Abs 1, EECR 2454/93 Art 143 Abs 1, CCIP Art 145 Abs 2, EECR 2454/93 Art 145 Abs 2, CCIP Art 148, EEC 2454/93 Art 148, CCIP Art 878ff, CCIP Art 878, EEC 2454/93 Art 878ff, EEC 2454/93 Art 878, GATTAbkArtVIIDVÜbk Art 8 para 3, TFEU Art 267

Previously FG Munich, 15 November 2018, Ref: 14 K 2028/18.

Guiding principles

1. According to the case law of the ECJ (judgment Hamamatsu Photonics Germany of 20.12.2017 - C-529/16, EU:C:2017:984, ZfZ 2018, 68), Art. 28 to 31 CC do not allow the customs value to be based on an agreed transaction value that is composed partly of an initially invoiced and declared amount and partly of a lump-sum adjustment after the end of the accounting period, without it being possible to say whether this adjustment will be upward or downward at the end of the accounting period.
2. This also applies to the valuation according to the final method under Article 31 CC. If, at the time of acceptance of the customs declaration, it is not certain whether an adjustment will have to be made at all at the end of the accounting period and, if this is the case, whether the adjustment will have to be made upwards or downwards, then a value of the goods that has consequently still to be determined at the time of acceptance of the customs declaration is not to be regarded as a value within the meaning of Article 8(3) of the Convention implementing Article VII of the General Agreement on Tariffs and Trade. VII of the General Agreement on Tariffs and Trade of 1994.

Operative part

The appellant's appeal against the judgment of the Munich Fiscal Court of 15 November 2018 - 14 K 2028/18 is dismissed as unfounded.

The costs of the appeal proceedings are to be borne by the plaintiff.

Facts

I.

1. The parties dispute the reimbursement of customs duty and the customs value of goods imported from October 2009 to September 2010.
2. The applicant and appellant (applicant) is a subsidiary of H, Japan. It is part of a globally active group.
3. In the period at issue, from 17 October 2009 to 30 September 2010, the applicant imported more than 1,000 consignments of various goods from H, which it had cleared for free circulation under customs and tax law at the defendant and appellant (Hauptzollamt HZA ). The applicant declared the prices invoiced to it by H as the customs value. Some of the imported articles were duty-free; for the articles that were not duty-free, the HZA imposed customs duties of between 1.4 % and 6.7 % by means of import duty notices.
4. In 2012, the plaintiff applied to the HZA for a refund of customs duties for the goods imported during the period at issue in the total amount of ... €. It referred to an Advance Pricing Agreement (APA) concluded between it and H for transactions in the tax field and stated that the adjustments to the transfer prices carried out on the basis of the APA had not been taken into account when declaring the goods for customs clearance and that it was now doing so.
5. The APA had already been concluded by the plaintiff and H in 2009 as part of a mutual agreement procedure under the agreement between the Federal Republic of Germany and Japan for the avoidance of double taxation with regard to taxes on income and certain other taxes. The Federal Central Tax Office and the Bavarian State Tax Office had approved the APA. The customs authorities had not been involved. The APA covered the sale of end products and components from H to the plaintiff as well as other business transactions related to the trade in goods.
6. On the basis of the APA, transfer prices were determined for certain business transactions. In the process, H initially invoiced the plaintiff a certain amount for each of the goods it supplied. The sum of these amounts was reviewed after the end of the business year and, if necessary, corrected in favour of or to the detriment of the plaintiff. In this way it was to be ensured that the transfer prices stood up to an arm's length comparison. For this purpose, the German and Japanese authorities involved chose the so-called residual profit split method at the request of the plaintiff and with reference to point 3.19 of the transfer pricing principles of the Organisation for Economic Cooperation and Development. According to this method, the combined profit of the plaintiff and H from the audited intra-group transactions was split in two stages. In a first stage, each party was first allocated a sufficient profit to achieve a minimum return. As a starting point, the returns on sales routinely achieved by comparable companies with similar operating profiles were used. In order to calculate the routine profit to be allocated, the full cost mark-up was used as profit indicators for H and the return on sales for the applicant. After apportioning the routine profit, in a second step the remaining residual profit was apportioned proportionally according to the profit apportionment factors. After determining the routine profit and the residual profit, the target range of the applicant's return on sales (operating margin) was set. If the applicant's actual profit was outside the target range, the profit was adjusted to the upper or lower limit of the target range and credits or debits were made to the applicant.
7. During the period at issue here, the applicant's return on sales was below the target range set out in the APA. For this reason, the plaintiff and H adjusted the transfer prices after the end of the accounting period for 2009/2010 by way of a credit note in the amount of ... €. The report of the Main Customs Office Cologne, Federal Customs Valuation Office, to which the Fiscal Court (Finanzgericht, FG) refers in the contested judgment, states that the amount had been allocated to various product groups on the basis of an allocation key; there had been no explanation of the individual product groups. The apportionment formula applied had been specified by H; the applicant was not aware of the basis on which H had determined this apportionment formula.
8. The applicant had calculated the duty to be refunded in its view by reducing the sum of all original customs values by the amount of the adjustment from the APA and then applying an average duty rate of 1.02% rounded up to the original or the adjusted customs value. The refund amount sought by the applicant resulted from the difference between the two values determined in this way. The applicant did not allocate the adjustment amount to the individual imported goods.
9. In its decision of 4 June 2014, the HZA rejected the refund application on the grounds that the method chosen by the applicant in the form of a global correction of the total price was not compatible with Article 29(1) of the Customs Code in conjunction with Article 144 of the Implementing Regulation. Article 144 of the Customs Code Implementing Regulation (CCIP). Due to the fact that the amount of the adjustment was not broken down by product, it was ultimately not possible to clarify and prove to which specific import goods the adjustment exactly related and in what amount it was to be made for them.
10. By decision of 2 July 2015, the HZA rejected the applicant's objection as unfounded.
11. The plaintiff filed a complaint against this. By order of 15 September 2016 - 14 K 1974/15 (Zeitschrift für Zölle und Verbrauchsteuern ZfZ , Beilage 2017, No. 2, 17), the FG stayed the proceedings pursuant to section 74 of the Finanzgerichtsordnung (FGO) and referred the following questions to the Court of Justice of the European Union (ECJ) for a preliminary ruling (Article 267 of the Treaty on the Functioning of the European Union TFEU ):

"1.  Do the provisions of Article 28 et seq. of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), as amended by Regulation (EC) No 2700/2000 of the European Parliament and of the Council of 16 November 2000 (OJ 2000 L 311, p. 17), allow a customs debt to be offset against a customs debt? (OJ 2000 L 311, p. 17), to take as the customs value, using an apportionment formula, an agreed transfer price consisting of an amount initially invoiced and declared and a flat-rate adjustment after the end of the accounting period, irrespective of whether a subsequent debit or credit is made to the person concerned at the end of the accounting period?

2. If so, can the customs value be assessed or determined using simplified approaches if the effects of subsequent transfer pricing adjustments (both upward and downward) are to be recognised?"
3. In the order for reference, the Fiscal Court explained that and why, in its view, it was justified to take as the customs value, using an apportionment formula, an agreed transfer price composed of an amount initially invoiced and declared and a lump-sum adjustment after the end of the accounting period. In particular, the Fiscal Court made it clear that, in its view, there was no transaction value in the dispute, but that it was possible to determine the customs value according to the final method of Article 31 CC.
4. Nevertheless, the ECJ answered the first question in the negative in Hamamatsu Photonics Deutschland of 20 December 2017 - C-529/16 (EU:C:2017:984, ZfZ 2018, 68), stating in the operative part: "Articles 28 to 31 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 82/97 of the European Parliament and of the Council of 19 December 1996, are to be interpreted as meaning that the customs value of the goods must be determined in accordance with Article 31 of that Regulation. The provisions of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 82/97 of the European Parliament and of the Council of 19 December 1996, must be interpreted as meaning that they do not permit the customs value to be based on an agreed transaction value which is composed partly of an amount initially invoiced and declared and partly of a flat-rate adjustment after the end of the accounting period, without it being possible to say whether, at the end of the accounting period, that adjustment will be made upwards or downwards."
5. The court then dismissed the action. In its reasoning, it stated that it still considered the reasons set out in its reference for a preliminary ruling as to why the price declared in the dispute during the year was not to be recognised as the customs value to be important, particularly as the ECJ had not commented on this in detail; nevertheless, the FG considered itself prevented by the preliminary ruling from passing a judgment that was at least partially favourable, because the ECJ had expressly not followed the result of the opinion of the FG set out above. The HZA was therefore right to determine the customs value on the basis of the transfer price declared during the year in accordance with Article 29 of the CCC and to refuse a pro rata reimbursement of the customs duty. The judgment is published in ZfZ 2019, 88.
6. In its appeal, the applicant argues that the Court of First Instance misapplied Articles 28 to 31 of the CC; the subsequent adjustments to the transfer prices it declared during the year in the form of credit notes should be taken into account in the determination of the customs value.
7. The applicant claims that the Court should annul the preliminary ruling and the negative decision of 4 June 2014 as well as the opposition decision of 2 July 2015 and order the HZA to reimburse the applicant a customs duty amount of € ....
8. The applicant also suggests that, since there is disagreement as to whether the ECJ's judgment precludes the application of the final method under Article 31 CCC, the appeal proceedings should be stayed and the ECJ should be seised again pursuant to Article 267 TFEU.
9. The HZA requested that the appeal be dismissed,
10. The HZA refers to the preliminary ruling of the ECJ and adds (in essence) that the refund request is not primarily precluded by legal grounds, but by factual grounds in the form of an impossibility for which the applicant is responsible. The proof of the necessary individual values of the goods was not possible due to the chosen adjustment mechanism in the form of the residual profit distribution method; the applicant had not provided the necessary data.

Reasons for decision

II.

20. The appeal is unfounded and must therefore be dismissed (§ 126.2 FGO). The FG was correct in dismissing the action.
21. The contested decision by which the HZA refused to refund the import duties sought by the plaintiff is lawful (§ 101 sentence 1 FGO). The applicant is not entitled to a refund of part of the duty it paid under the first subparagraph of Article 236(1) of the CCC.
22. (1) Import duties are payable under the first subparagraph of Article 236(1) of the CCC in conjunction with Articles 878 et seq. of the CCC. Art. 878 ff. CCCIP if it is proven that the amount of duty was not legally owed at the time of payment. Under Article 235(a) CC, the concept of repayment also includes the refund of part of the import duties paid.
23. in addition, Art. 78(1) CC enables the customs authorities to carry out a verification of the declaration after the release of the goods, either ex officio or at the request of the declarant.
24. a) An amount of duty is legally owed within the meaning of Article 236(1), first subparagraph, CC if a customs debt has arisen under the conditions laid down in Title VII, Chapter 2, CC and the amount of that duty could be determined by applying the Common Customs Tariff in accordance with the provisions of Title II, CC (ECJ judgment Transport Maatschappij Traffic of 20. 10.2005 - C-247/04, EU:C:2005:628, para 29, ZfZ2005, 411; cf. also ECJ judgment Road Air Logistics Customs of 13.12.2007 - C-526/06, EU:C:2007:793, para 29, ZfZ 2008, 10).
25. aa) Pursuant to Article 201(1)(a) CC, the customs debt on importation arises when goods liable to import duty are released for free circulation. According to Article 201(2) CC, the customs debt is incurred when the relevant customs declaration is accepted.
26. According to Article 214(1) CC, the amount of import or export duty to be levied on a good is in principle determined on the basis of the taxable amounts applicable to the good at the time the customs debt is incurred. These bases of assessment include the nature of the goods, their quantity, their customs value and the customs duty rate (Senate decision of 2 July 2012 - VII B 104/11, BFH/NV 2012, 2033; see also Witte/Witte, Zollkodex, 6th edition, Art. 214, margin note 1; Deimel in Dorsch, Zollrecht, Art. 214 CC, margin note 7).

27 Only the customs value is in dispute in the present proceedings.

28. bb) The determination of the customs value is based on the methods set out in Art. 29 et seq. CCC (cf. Art. 28 CCC).
29. Accordingly, the transaction value method according to Art. 29 CC is to be applied with priority. If the customs value cannot be determined using the transaction value method, the subsequent methods described in Art. 30 CC apply (subordinate methods). If the customs value cannot be determined according to these methods either, the final method according to Art. 31 CC must be applied.
30. According to consistent ECJ case law, the customs valuation system under EU law is intended to establish a fair, uniform and neutral system that excludes the application of arbitrary or fictitious customs values. The customs value must therefore reflect the actual economic value of an imported good and consequently take into account all elements of that good that have an economic value (ECJ judgment Hamamatsu Photonics Germany, EU:C:2017:984, para 24, with further references, ZfZ 2018, 68).
31. (1) Pursuant to Article 29(1) of the CCC, the customs value of imported goods is in principle the transaction value, i.e. the price actually paid or payable for the goods when they are sold for export to the customs territory of the Union, adjusted, if necessary, by additions pursuant to Article 32 of the CCC and deductions pursuant to Article 33 of the CCC.
32. This requires, in accordance with Art. 29 (1) (b) CC in conjunction with Art. 148 CCIP, that the price actually paid or payable be adjusted. (b) in conjunction with Article 148 of the CCCIP, this presupposes that, with regard to the purchase transaction or the price, there are neither conditions nor services to be rendered whose value cannot be determined with regard to the goods to be valued.
33. Pursuant to Article 29(1)(d) in conjunction with Article 29(2)(a)(1) of the CCCD, the value of the goods to be valued cannot be determined. (2)(a), first sentence, of the CCC, the relationship between the buyer and the seller in determining whether the transaction value within the meaning of Article 29(1) of the CCC can be accepted is not in itself a reason for considering the transaction value to be unacceptable. According to Article 29(2)(a), second sentence, CC, if necessary, the circumstances surrounding the purchase transaction are to be examined and the transaction value is to be recognised if the relationship did not influence the price. Whether there is a connection in this sense is determined by Article 143(1) of the CCCIP.
34. Finally, according to the first sentence of Article 29(3)(a) CC, the price actually paid or payable is the full payment made or to be made by the buyer to or for the benefit of the seller for the imported goods and includes any payment actually made or to be made by the buyer to the seller or by the buyer to a third party as a condition of the sale of the imported goods in order to fulfil an obligation of the seller.
35. (2) If the customs value cannot be determined in accordance with Article 29 CC, the consequential methods already mentioned apply (see ECJ judgment Hamamatsu Photonics Germany, EU:C:2017:984, para 26, with further references, ZfZ 2018, 68). Accordingly, the transaction value of identical or similar goods is decisive or the customs value is to be determined deductively or according to a calculated value (Art. 30 CC).
36. (3) If the customs value cannot be determined by these methods either, it must be determined in accordance with Art. 31 (1) CC on the basis of data available in the Union by means of appropriate methods that comply with the guidelines and general rules of the Convention on the Implementation of Art. VII of the General Agreement on Tariffs and Trade 1994, Art. VII of the General Agreement on Tariffs and Trade 1994 and the provisions of this Chapter (Art. 28 to 36 CC).
37. The valuation methods to be used under Article 31(1) CC are those set out in Articles 29 and 30(2) CC; however, reasonable flexibility in the use of such methods is consistent with the objectives and provisions of Article 31(1) CC (Article 141(1) CCIP in conjunction with Annex 23 to Article 31(1) CC). The application of the final method must respect the basic principles of customs valuation in accordance with Articles 29 and 30 CC (Senate ruling of 23 March 2021 - VII R 24/19, BFHE 273, 374, marginal no. 25, with further references).
38. Pursuant to Article 31(1) CC, an assessment on the basis of data that is not available in the Union is inadmissible. Although the origin of the data on which the determination of the customs value is based is not in itself a ground for excluding the application of the conclusion method, the customs authorities must be able to satisfy themselves as to the correctness or accuracy of that data when applying the conclusion method (12.3 of the Advisory Opinions of the Technical Committee on Customs Valuation in the Application of Article 7 of the Convention on the Implementation of Art. VII of the General Agreement on Tariffs and Trade of 1994 - German translation in Müller-Eiselt/Vonderbank, EU-Zollrecht, Zollwert, Fach 3320, A.12.3 Rz 2; see also Senate judgment of 12 July 2011 - VII R 65/10, ZfZ 2011, 300, Rz 14 ff; Wäger in Hübschmann/Hepp/Spitaler HHSp [180th ed.], Art. 31 ZK Rz 10).
39. Furthermore, according to Article 31 (2) (g) CC, valuation according to arbitrary or fictitious values is inadmissible. Arbitrary values are values that are not in line with commercial practice or that are based on assumptions that are not objectively justified (see Wäger in HHSp [180th ed.], Art. 31 CC para 10; Witte/Rinnert, Customs Code, 6th ed.)
40. cc) The decisive point in time for determining the customs value is, pursuant to Article 214 (1) CC, the point in time at which the customs debt was incurred, i.e. in the present case the point in time at which the customs declarations in question were accepted (Article 67 in conjunction with Article 201 (2) CC). Art. 201 (2) CC; see also Krüger in Dorsch, loc. cit., Art. 29 CC marginal no. 43). The customs valuation is therefore a commodity- and cut-off date-related valuation.
41. (1) If the determination of the customs value is based on Article 29 CC, the relevant transaction value is regularly the price actually paid or payable for the goods at the time of acceptance of the customs declaration (Article 144(1) CCIP; see also Senate decision of 10 November 2006 - VII B 342/05, BFH/NV 2007, 291; Wäger in HHSp [180th ed.], Article 29 CC, margin no. 5). It is therefore a question of a selective determination of the customs value that relates to a specific transaction (see also Roth/Rinnert, Deutsches Steuerrecht 2018, 2090, 2091).
42. As a result, changes in the factual or legal circumstances that occur only after payment of the amount of duty cannot, in principle, justify a refund under the first subparagraph of Article 236(1) CC (see Deimel in HHSp [217th ed.], Art. 235-236 CC, margin note 46; Schwarz in Schwarz/Wockenfoth, Zollrecht, 3rd ed. In particular, a subsequent change in the purchase price under Art. 145 (2) CCIP is in principle only to be taken into account if it is proven to the customs authority that the goods were defective at the time of acceptance of the customs declaration (cf. Senate judgement of 15.06.1993 - VII R 69/90, BFH/NV 1994, 355, under II., on Article 2(1) of Council Regulation (EEC) No. 1430/79 of 2 July 1979 on the repayment or remission of import or export duties, Official Journal of the European Communities OJ 1979, No. L 175, 1, with regard to damage that had already occurred prior to delivery; see also Deimel in HHSp [217th ed.], Art. 235-236 ZK Rz 36; Schwarz in Schwarz/Wockenfoth, Zollrecht, 3rd ed, Art. 236 marginal no. 8a).
43. Accordingly, the ECJ has also allowed a subsequent adjustment of the transaction value only in special cases in order to prevent the determination of an arbitrary or fictitious customs value (see ECJ judgment Hamamatsu Photonics Germany, EU:C:2017:984, para 30, ZfZ 2018, 68; see also ECJ judgment Mitsui & Co. Germany of 19.03.2009 - C-256/07, EU:C:2009:167, para 24 ff, with further references, ZfZ 2009, 101, with reference to Art. 145 para. 2 CCIP and recitals 4 and 5 of Commission Regulation (EC) No. 444/2002 of 11 March 2002 amending Regulation (EEC) No. 2454/93 laying down detailed rules for the application of Council Regulation (EEC) No. 2913/92 establishing a Community Customs Code. 2913/92 establishing the Community Customs Code and Regulations (EC) No 2787/2000 and (EC) No 993/2001, OJ 2002, No L 68, 11; also ECJ judgment X of 12.10.2017 - C-661/15, EU:C:2017:753, para 36, ZfZ 2018, 14).
44. In the case where, as in the dispute, the agreed transaction value is composed partly of an initially invoiced and declared amount and partly of a lump-sum adjustment after the end of the accounting period, without it being possible to say whether at the end of the accounting period this adjustment is upward or downward, the ECJ has expressly ruled out a subsequent adjustment under the application of the CC (ECJ judgment Hamamatsu Photonics Germany, EU:C:2017:984, para 35, ZfZ 2018, 68).
45. (2) If the customs value is determined using the final method, the other appropriate methods to be used must also be based on the time of importation (cf. e.g. Senate decision of 4 July 2013 - VII R 56/11, BFHE 242, 472, ZfZ 2013, 271, margin no. 31; see also Schwarz in Schwarz/Wockenfoth, Zollrecht, 3rd ed.)
46. According to the implementing provision in the Explanatory Notes on the Determination of the Customs Value No. 1 to Article 31 (1) CC in Annex 23 of the CCIP, customs values determined earlier should be used if possible. Nevertheless, in this respect it is also a question of coming as close as possible to the "real value" of the goods at the time of their importation (cf. Krüger in Dorsch, loc. cit., Art. 31 CC marginal no. 5). This also results from the rules of interpretation in the Explanatory Notes No. 3 (a) and (b) to Article 31 (1) CC in Annex 23 of the CCIP, which refer in each case to identical or similar goods that are exported "at the same time or approximately at the same time as the goods to be valued". These rules of interpretation are binding for the application of Article 31 (1) CC (cf. Senate ruling of 12.12.2002 - VII R 43/01, BFHE 200, 468, ZfZ 2003, 193, under 1.a). Accordingly, the determination of customs value under Article 31 CC is always a goods-related and cut-off date-related determination of value.
47. The general regulations to be taken into account under Article 31 (1) CC also include Article 8 (3) of the Convention implementing Article VII of the General Agreement on Tariffs and Trade. VII of the General Agreement on Tariffs and Trade of 1994. According to this, additions to the price actually paid or payable may only be made on the basis of objective and quantifiable information. This requirement, too, must be related to the time at which the customs debt is incurred, in this case the time at which the customs declaration in question is accepted. It follows that additions to the price actually paid or payable may only be made on the basis of information that can already be objectified and quantified at the time of the customs declaration.

48) Art. 8 (3) of the Convention for the Implementation of Art. VII of the General Agreement on Tariffs and Trade of 1994 must, in the view of the court, be applied accordingly if the customs value of imported goods is to be corrected not by additions but by deductions from the price actually paid or payable. Such deductions may therefore also only be made on the basis of information that can already be objectified and quantified at the time of the customs declaration.

49. It follows that the dictum of the ECJ, according to which the CC does not allow the customs value to be based on an agreed transaction value that is composed partly of an amount initially invoiced and declared and partly of a lump-sum adjustment after the end of the accounting period, without it being possible to say whether this adjustment will be upward or downward at the end of the accounting period, is in any case in the result also decisive for the determination of the customs value according to the final method under Article 31 CC. If, at the time of the customs declaration, it is not certain whether an adjustment will have to be made at all at the end of the accounting period and whether, if this is the case, it will have to be made upwards or downwards, then the value of the goods determined in this way or actually still to be determined at the end of the accounting period at the time of the customs declaration is not relevant within the meaning of Article 8(3) of the Convention on the Implementation of Article VII of the General Agreement on Tariffs and Trade. VII of the General Agreement on Tariffs and Trade of 1994.
50. dd) The burden of proof in the case of an application for a refund under Article 236 (1), first subparagraph, CC lies with the applicant (Article 878 CCIP). The applicant must explain and, if necessary, prove that or to what extent duties have been paid incorrectly and, in accordance with Art. 6 CC, provide all the necessary information and documents for the customs authorities' decision.
51. If this proof cannot be provided, a refund is excluded. Ambiguities that cannot be resolved are at the expense of the applicant (see Deimel in HHSp [217th ed.], Art. 235-236 CC para 50; Witte/Alexander, Zollkodex, 6th ed., Art. 236 para 19; see also Gellert in Dorsch, loc. cit., Art. 236 CC para 18).
52. b) Based on these legal principles, the requirements for a refund under Article 236(1) CC are not met in the present case. The applicant has not proven that the customs debt it paid was not legally owed at the time of acceptance of the respective customs declaration.
53. aa) According to the undisputed findings of the Fiscal Court, the parties initially determined the customs value on the basis of the prices invoiced to the applicant by H during the year in accordance with Article 29 CCC using the transaction value method. At the time of the acceptance of the customs declarations, which were not submitted as incomplete, there were no indications that these prices did not reflect the actual economic value of the imported goods and did not take into account all elements of these goods that had an economic value. In particular, according to the findings of the Court of First Instance, the customs authorities were not involved in the agreement reached during the mutual agreement procedure.
54. Thus, at the time of acceptance of the customs declaration, there were neither conditions within the meaning of Article 29(1)(b) CCC which would have precluded a determination of the customs value according to the transaction value method, nor was the relationship between the applicant and H pursuant to Article 29(1)(d) in conjunction with Article 29(2)(a) sentence 1 apparent. (2)(a), first sentence, was a reason to regard the transaction value as unacceptable.
55. bb) The applicant did not prove that the imported goods had a lower value at the time of acceptance of the customs declarations.
56. (1) The subsequent adjustment of the transfer prices due to the disputed APA is not suitable in the present dispute to prove a lower transaction value (see above, under II.1.a cc (1)). In this respect, the tax court correctly referred to the ECJ ruling.
57. (2) There are no indications for a valuation pursuant to Article 30 (2) CC. The plaintiff has not submitted anything in this respect.
58. (3) Finally, the APA at issue is also not suitable to justify a subsequent adjustment of the transfer prices according to the closing method (Article 31 CC). At the time of the respective customs declarations, it was not clear whether the declared values of the goods would be corrected on the basis of the transfer prices that had yet to be determined after the end of the accounting period and, if this were to be the case, whether a correction would be made by means of upward or downward markdowns. It was also unclear how much the corrections would have to be. This meant, however, that the surcharges or deductions that might in any case only possibly result were not known at the time of the customs declaration within the meaning of Article 8(3) of the Convention implementing Article VII of the General Agreement on Tariffs and Trade. VII of the General Agreement on Tariffs and Trade of 1994.
59. (4) In the present case, it can therefore be left open whether the seller's subsequent global credit to the originally agreed product prices resulting from the transfer pricing in accordance with the APA constitutes a reason to exclude the application of the transaction value method, which is to be applied with priority. Such a transfer price adjustment, which serves as an income tax instrument to avoid disputes and to reduce transfer price risks (see Liebchen in Mössner et al., Steuerrecht international tätiger Unternehmen, 5th ed., margin no. 13.50; cf. also Drüen in Wassermeyer MA Art. 25 MK margin no. 110), remains in any case without influence on the relevant customs value within the framework of all customs valuation methods due to the explained commodity and reference date-related nature of the customs valuation.
60. cc) Only in addition does the Court point out the following: According to the findings already mentioned at the beginning (see above, p. 4) and referred to by the Fiscal Court from the report of the Main Customs Office Cologne, Federal Customs Valuation Office, the allocation of the credit note in the amount of ... € to various products was carried out on the basis of an allocation key specified by H, without any explanation of these product groups and without the applicant being able to explain on what basis H had determined this allocation key. This raises the question of whether the deductions made in the case in dispute from the prices declared on importation were based at all on data available in the Union within the meaning of Article 31 CCC and whether the HZA would therefore have been in a position to convince itself of the correctness of the apportionment made. If this were not the case, this would also preclude a customs valuation according to the final method pursuant to Article 31 (1) CC, as explained above under II.1.a bb (3). However, this is not relevant for the present dispute.
61. (2) According to all of the above, a new referral to the ECJ is not necessary.
62. (3) The decision on costs is based on section 135(2) of the FGO

***

Contact us and speak with an international tax lawyer: https://yourinternationaltaxlawyers.net

Discover our courses

COURSE 1 TAX HAVENS COURSE - GLOBAL CITIZEN COURSE - BUSINESS INTERNATIONALIZATION COURSE

https://yourinternationaltaxlawyers.net/index.php/course-1

COURSE 2 Learn 10 hidden strategies used by elites and multimillionaires to reduce their taxes, and start saving taxes right NOW, even without moving abroad

https://yourinternationaltaxlawyers.net/index.php/course-2

***