Medtronic III – U.S. Tax Court attempts to “bridge the gap”?

In light of the recent U.S. Tax Court deliberation in the Medtronic case, this contribution intends to discuss the facts, considerations and conclusions reached. Further, this contribution alongside with upcoming contributions intends to critically assess the conclusions reached by the U.S. Tax Court (as well as comparable court cases) and, the possibility of reaching a different conclusion considering another approach to the case based on the complexity provided by the parties involved.

25 Oct. '22 Patrick T.F. Schrievers

The Medtronic dispute can be characterized (from the perceptive of Revenue Authorities) as “the classic case of a U.S. MNE taxpayer (Medtronic) shifting income from its highly profitable U.S. operations and intangibles to an offshore subsidiary operating in a tax haven (Medtronic Puerto Rico), by charging an artificially low rate for the intangibles". Medtronic’s view of the case is that because its Puerto Rico subsidiary bears the lion’s share of potential liability arising from any defectively manufactured products, it was entitled to a commensurate rate of return on its operations there.


Medtronic is a medical device company that produces and markets class III devices, which include implantable cardiac pulse generators and neurological stimulators (devices), as well as other medical therapy devices (leads). Medtronic’s parent company, Medtronic US, and its distributer, Medtronic USA, Inc. are located in the United States, and its class III device manufacturer, Medtronic Puerto Rico Operations Co. (MPROC), is located in Puerto Rico. Medtronic allocates the profit earned from its devices and leads between Medtronic US, Medtronic USA, and MPROC through its intercompany licensing agreements.

Patrick T.F. Schrievers

Patrick T.F. Schrievers is a tax lawyer and member of the Dutch Association of Tax Advisers (NOB) and the International Fiscal Association (IFA).

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