Germany vs “Spedition Gmbh”, December 2012, Federal Tax Court 11.10.2012, I R 75/11

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Spedition Gmbh entered a written agreement – at year-end – to pay management fees to its Dutch parent for services received during the year.

The legal question was the relationship between arm’s-length principle as included in double tax treaties and the norms for income assessments in German tax law.

The assessment of the tax office claiming a hidden distribution of profits because of the “retrospective” effect of the written agreement, was rejected by the Court.

According to the Court the double tax treaty provisions bases the arm’s length standard on amount, rather than on the reason for, or documentation, of a transaction.

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