Germany vs “C GmbH”, June 2022, Finanzgericht Köln, Case No 10 K 1406/18

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In 2014 a profit transfer agreement was effectively concluded between the plaintiff, C GmbH (controlled company), and its sole shareholder A. The profits to be transferred and interest to be paid for the disputed years 2009-2011 were subsequently booked to a “liabilities to shareholders” clearing account, but counterclaims or lump sum payments were not booked.

The tax Authorities did not recognize the profit transfer agreement for 2009-2011 on the grounds that the agreement had not actually been implemented before 2014. Merely posting a liability to the clearing account is not sufficient.

An appeal was filed by C GmbH.

Judgement of the FG

The FG dismissed the appeal. The court agreed with the tax authorities and concluded that the 2014 profit transfer agreement had not actually been carried out for 2009-2011.

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