The High Court recently overturned the TAC decision on the “Susquehanna” case. Please comment on the case and how the decision was made by the High Court.
Contributor: Michelle Adams, Senior Manager, Financial Services Tax, BDO
The long anticipated High Court judgement in the Susquehanna case was given on the 2nd October 2024. The case involved the entitlement to group relief under S.411 TCA 1997 for losses incurred by Susquehanna International Group Limited and its subsidiaries. Revenue denied the group relief claim on €46.6m of losses incurred in 2010, 2011 and 2012 on the basis that the parent of the group, Susquehanna International Holdings LLC, is a Delaware corporation under the Delaware LLC Act. Revenue advised that the LLC is not a company for Irish tax purposes and is not tax resident in the US on the basis that it is treated as a transparent entity.
The case was originally brought to the TAC on 12 April 2019 where the TAC ruled in favour of Susquehanna. The TAC narrowed its considerations into 3 specific questions and ultimately ruled in favour of Susquehanna on the basis that the LLC is a company for the purposes of S.411 TCA 1997 and the LLC is resident for the purposes of tax in the US as it is “liable to tax” in the US by virtue of its members being taxed in the US. The TAC had concluded on its determination by a purposive interpretation of the DTA as opposed to a literal interpretation, which it is intended.
Revenue appealed the decision to the High Court. The court concluded that the LLC was not liable to tax in the US under US law by strict literal interpretation of the DTA. It was also concluded that the anti-discrimination provisions of the DTA did not apply to the LLC as a result of its transparent status. The High Court overturned the decision of the TAC and it was concluded that the Susquehanna group was not entitled to group relief under S.411 TCA 1997 as the LLC was not a resident of the US for tax purposes. The court highlighted that the purpose of the DTA is to avoid double taxation and prevent fiscal evasion and not to extend treaty benefits to entities that are not liable to tax in their home jurisdiction.
This case should be a reminder of the importance of adhering to the literal interpretation of the DTA’s. The case should also assist with future interpretations of the tax treaties when considering the tax position of LLC’s.
Contributor: Michelle Adams, Senior Manager, Financial Services Tax, BDO
The long anticipated High Court judgement in the Susquehanna case was given on the 2nd October 2024. The case involved the entitlement to group relief under S.411 TCA 1997 for losses incurred by Susquehanna International Group Limited and its subsidiaries. Revenue denied the group relief claim on €46.6m of losses incurred in 2010, 2011 and 2012 on the basis that the parent of the group, Susquehanna International Holdings LLC, is a Delaware corporation under the Delaware LLC Act. Revenue advised that the LLC is not a company for Irish tax purposes and is not tax resident in the US on the basis that it is treated as a transparent entity.
The case was originally brought to the TAC on 12 April 2019 where the TAC ruled in favour of Susquehanna. The TAC narrowed its considerations into 3 specific questions and ultimately ruled in favour of Susquehanna on the basis that the LLC is a company for the purposes of S.411 TCA 1997 and the LLC is resident for the purposes of tax in the US as it is “liable to tax” in the US by virtue of its members being taxed in the US. The TAC had concluded on its determination by a purposive interpretation of the DTA as opposed to a literal interpretation, which it is intended.
Revenue appealed the decision to the High Court. The court concluded that the LLC was not liable to tax in the US under US law by strict literal interpretation of the DTA. It was also concluded that the anti-discrimination provisions of the DTA did not apply to the LLC as a result of its transparent status. The High Court overturned the decision of the TAC and it was concluded that the Susquehanna group was not entitled to group relief under S.411 TCA 1997 as the LLC was not a resident of the US for tax purposes. The court highlighted that the purpose of the DTA is to avoid double taxation and prevent fiscal evasion and not to extend treaty benefits to entities that are not liable to tax in their home jurisdiction.
This case should be a reminder of the importance of adhering to the literal interpretation of the DTA’s. The case should also assist with future interpretations of the tax treaties when considering the tax position of LLC’s.