Indofood International Finance Ltd v JP Morgan Chase Bank N.A. London Branch [2006] EWCA Civ 158 (02 March 2006)

Indofood International Finance Ltd v JP Morgan Chase Bank N.A. London Branch [2006] EWCA Civ 158 (02 March 2006)

The interposition of Newco would not constitute a reasonable measure to avoid the increased withholding tax because, under the Dutch DTA and Indonesian law, Newco would not be regarded as the beneficial owner of the interest. The structure would be seen as treaty shopping and would likely be challenged and denied by the Indonesian tax authorities. Therefore, the Issuer discharged the onus of establishing that no reasonable measures were available to avoid the higher withholding tax, entitling it to redeem the loan notes.

Citation
[2006] EWCA Civ 158
Parties
Claimant/appellant: Indofood International Finance Ltd.; Defendant/respondent: JPMorgan Chase Bank N.A., London Branch
Jurisdiction
England and Wales
Judgment Date
02 March 2006
Procedural Posture
Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal
Outcome
Appeal allowed
Legal Topics
Withholding Tax, Double Taxation Agreements, Beneficial Ownership, Trust Deeds, Loan Notes, Treaty Shopping
Commercial Law Tax Law Contract Law Withholding Tax Double Taxation Agreements Beneficial Ownership Trust Deeds Loan Notes +1 more

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Parties

Indofood International Finance Ltd.

Claimant/appellant

JPMorgan Chase Bank N.A., London Branch

Defendant/respondent

Procedural Posture

Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal

Legal Issues

  1. 1 Whether the interposition of a Dutch company (Newco) between the Parent Guarantor and the Issuer would allow the avoidance of increased Indonesian withholding tax under the Dutch DTA.
  2. 2 Whether Newco would be the beneficial owner of the interest under the Dutch DTA.
  3. 3 Whether Newco would be resident in the Netherlands for tax purposes under the Dutch DTA.

Ratio Decidendi

The interposition of Newco would not constitute a reasonable measure to avoid the increased withholding tax because, under the Dutch DTA and Indonesian law, Newco would not be regarded as the beneficial owner of the interest. The structure would be seen as treaty shopping and would likely be challenged and denied by the Indonesian tax authorities. Therefore, the Issuer discharged the onus of establishing that no reasonable measures were available to avoid the higher withholding tax, entitling it to redeem the loan notes.

Court Disposition

Appeal allowed

Orders

  • Declaration that the Issuer is entitled to redeem the loan notes under the Note Conditions as no reasonable measures are available to avoid the increased withholding tax.