Liechtenstein vs A c/o B AG, October 2017, Constitutional Court, Case No StGH 2017/079

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In the tax return for FY 2014, A c/o B AG declared a asset loans to related parties (holding company C) in the amount of USD 67,322,417.76 and liability loans to related parties (shareholder) in the amount of USD 110,051,410.39. Furthermore, interest income of USD 1,917,825.02 and interest expenses of USD 1,894,410.39 were declared in the tax return. A c/o B AG reported a net loss of USD 16,803.00.

An assessment was issued 10 September 2015 by the tax administration. The tax administration adjusted the taxable net income/loss by an additional income of USD 1,024,661.00 and further tax adjustments of USD 1,224.00. The adjustment of USD 1,024,661.00 was justified because interest of 3.5% (USD 1,024,661.00) had been paid on the outstanding interest claims amounting to USD 29,276,021.00, although it had been agreed in the loan agreement of 28 December 2002 that the interest was to be paid quarterly. The granting of insufficiently interest-bearing advances to related companies constituted a pecuniary benefit in accordance with the “2014 information sheet on interest rates for the calculation of pecuniary benefits”.

An appeal was filed by A c/o B AG with the Administrative Court which was dismissed in judgment of 13 June 2017, VGH2017/008. An appeal was then filed with the Constitutional Court

Judgement of the Court

The Court dismissed the appeal. A c/o B AG’s constitutionally guaranteed rights had not been violated by the contested judgment of the Administrative Court.

Excerpts
“Contrary to the appellant’s view, the present case does not involve a balance sheet correction, but a balance sheet amendment which it subsequently made. The Administrative Court’s reasoning that the annual financial statement submitted with the tax return does not contain any balance sheet item that violates mandatory commercial law provisions, and that consequently no balance sheet adjustment, but rather a balance sheet amendment was made by the complainant after the submission of the tax return of 25 August 2015 and the annual financial statement, is therefore not objectionable. Likewise, the further reasoning of the Administrative Court that the complainant, in accordance with the principle of the authoritative nature of the commercial balance sheet for the tax balance sheet (cf. VGH 2016/004; VGH 2016/003; VGH 2015/062 [all available at www.gerichtsentscheide.li]), must in principle allow itself to be held liable in the annual financial statements submitted by it, is also factually justifiable. The Administrative Court explained that the balance sheet is final from a certain point in time and subsequent changes can no longer be made. According to case law, an amendment of the balance sheet was only permissible until the submission of the tax return (see above para. 9.3 of the facts with reference to BGE 141 II 83, para. 3.4). The fact that the complainant – according to the Administrative Court – had chosen a procedure that was not optimal from a tax point of view by directly booking the depreciation of participation C (account 1500) with the shareholder’s account correction (account 2100) in a way that did not affect income, did not constitute grounds for a balance sheet correction. Nor were the conditions for a change in the balance sheet fulfilled because the complainant had submitted the tax return without reservations, together with the auditors’ report and the minutes of the general meeting. Thus, the complainant was no longer permitted to subsequently adjust the balance sheet under commercial law.

The Administrative Tribunal also points out that the complainant only submitted its amended annual financial statements together with the auditor’s report and the amended tax return to the Administrative Tribunal with its appeal of 16 January 2017. Under procedural law, it is inadmissible under the provisions of tax law to submit new evidence with the appeal to the Administrative Tribunal (Art. 118 para. 3 SteG; cf. also Art. 116 para. 3 sentence 1 and Art. 117 para. 3 sentence 3 SteG). For this reason, too, the Administrative Court was not allowed to address and consider this new evidence.

Finally, it is necessary to address the argument made in connection with the complaint of arbitrariness, according to which the authorities had violated the principle of trust. This complaint is unfounded. There was never any assurance from the authorities, which the complainant rightly did not claim. In the absence of an assurance by the authorities, however, the principle of legitimate expectations cannot have been violated (cf. CJEU 2007/112, para. 5.1; CJEU 2012/192, para. 4.1; CJEU 2013/42, para. 4.1; CJEU 2014/55. para. 2.4 [all www.gerichtsentscheide.li]).

The complainant’s right to be treated without arbitrariness was therefore not violated.

For all these reasons, the complainant was not successful with any of her fundamental rights complaints, so that the present individual complaint had to be dismissed.”

 
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StGH2017079

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