“HQ Lender GmbH” is the sole shareholder and at the same time the controlling company of A GmbH. The latter held 99.98% of the shares in B N.V., a corporation with its seat in Belgium. The remaining shares in B N.V. were held by HQ Lender GmbH itself. A GmbH maintained a clearing account for B N.V., which bore interest at 6% p.a. from 1 January 2004. No collateralisation was agreed in regards of the […]
Applicable method for determining the arm’s length price in the case of a loan granted by a sister corporation domiciled abroad: (1) Are the three recognised methods for determining arm’s length prices (price comparison method, resale method and cost plus method) equally applicable? (2) Should the price comparison method be used if a comparable price can be determined on the basis of identical service relationships and conditions, and the cost-plus method if there are no […]
A German corporation,”G Corp” held interests in domestic and foreign companies in the year in dispute (2005). G Corp granted loans to various subordinate companies – resident in France and the USA. These loans were mainly at fixed interest rates; instead of a fixed interest rate, an annual participation of 12.5% in the balance sheet profit of the subordinate company, limited to a maximum amount of 25% of the loan volume, was agreed as consideration […]
Lender GmbH acquired all shares in T GmbH from T in 2012 (year in dispute) for a purchase price of … €. To finance the purchase price of the shares, Lender GmbH took out a loan from its sole shareholder, D GmbH, a loan in the amount of … €, which bore interest at 8% p.a. (shareholder loan). The interest was not to be paid on an ongoing basis, but only on expiry of the […]
A GmbH provided funding in the form of a clearing account to its Belgian subsidiary. The account was unsecured and carried an interest of 6% p.a. In 2005, A GmbH and the Belgian company agreed on a debt write-off which was deducted for tax purposes. The tax authorities issued an assessment where the write-off was denied as a tax deductible expense. According to the tax authorities, independent third parties would have agreed on some kind […]
A request for mutual agreement and arbitration procedure between Spain and Germany was denied due to highly punishable violation of tax regulations committed by the taxpayer. The mutual agreement procedure according to the EU Arbitration Convention is of a mandatory nature and therefore leads to the elimination of double taxation if the requirements are met. However, if it is determined through legal or administrative proceedings that one of the companies involved has committed a highly […]
G-Lender GmbH, owned 50% of Austrian company A GmbH. The remaining 50% of the shares in A GmbH were held by non related shareholders, who at the same time acted as managing directors of A GmbH. G-Lender GmbH granted A GmbH a total of five loans. These loans each carried an interest rate of 5.5% pa. Assets owned by A GmbH were assigned as collateral. On 22 January 2002 and 16 June 2002, A GmbH […]
Waiver KG had an outstanding (non-interest-bearing and unsecured) trade receivable of EUR 2,560,000 from a wholly-owned subsidiary in China related to deliveries made in FY 2004 and 2005. Waiver KG had first issued a partial waiver (EUR 560,000) on the receivable and then a complete waiver in December 2008, after a partial write-down had previously been made in the commercial balance sheet. The initial partial write-down had not been given effect to the taxable income, […]
C A GmbH managed an unsecured clearing account for a Belgian subsidiary. After financial difficulties in the Belgian subsidiary, C A GmbH waived their claim from the clearing account and booked this in their balance sheet as a loss. However, the tax office disallowed the loss according to § 1 Abs. 1 AStG. Up until now, the Bundesfinanzhof has assumed for cases that are subject to a double taxation agreement (DTA), that Art. 9 para. 1 OECD […]
The Bundesfinanzhof confirmed prior case law according to which the provisions on hidden deposits and hidden profit distributions must be observed in the context of the additional taxation. On the question of economic activity of the controlled foreign company, the Bundesfinanzhof refers to the ruling of the European Court of Justice concerning Cadbury-Schweppes from 2006. According to paragraphs §§ 7 to 14 in the Außensteuergesetz (AStG) profits from controlled foreign companies without business activity can […]
