Tag: Comparable to a Bank Loan

Germany vs "G-Corp GmbH", June 2021, Bundesfinanzhof, Case No I R 32/17

Germany vs “G-Corp GmbH”, June 2021, Bundesfinanzhof, Case No I R 32/17

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 for one loan. No collateral was provided. In the year in dispute, G Corp wrote off these loans against taxable profits. G Corp also transferred assets at book value to a Maltese subsidiary company, of which it was the sole shareholder, and contributed the shares in this company, pursuant to section 23(4) of the Reorganisation Tax Act applicable in the year in dispute, also at book value, to another Malta-based company in the context of a capital increase against the granting of company rights. Finally, ... Read more
Poland vs L S.A, June 2019, Supreme Administrative Court, Case No. II FSK 1808/17 - Wyrok NSA

Poland vs L S.A, June 2019, Supreme Administrative Court, Case No. II FSK 1808/17 – Wyrok NSA

A Polish subsidiary in a German Group had taken out a significant inter-company loan resulting in a significantly reduced income due to interest deductions. At issue was application of the Polish arm’s length provisions and the arm’s length nature of the interest rate on the loan. The tax authorities had issued an assessment where the interest rate on the loans had been adjusted and the taxable income increased. On that basis, a complaint was filed by the company to the Administrative Court. The administrative court rejected the complaint and ruled in favor of the tax authorities. An appeal was then brought before the Supreme Administrative Court. The Supreme Administrative Court rejected the appeal, although it did not share some of the conclusions and statements of the Court of first instance. The key issue in the case was to determine is whether the provisions of Art. 11 (Containing the Polish arm’s length provisions), allowing the authority to determine the income of ... Read more
Spain vs McDonald's, March 2017, Spanish Tribunal Supremo, Case no 961-2017

Spain vs McDonald’s, March 2017, Spanish Tribunal Supremo, Case no 961-2017

An adjustments had been made by the tax authorities to a series of loans granted by GOLDEN ARCHES OF SPAIN SA (GAOS), domiciled in Ireland, to RESTAURANTES MC DONALDS, S.A. (RMSA), throughout the period 2000/2004 for amounts ranging between 10,000,000 and 86,650,000 €, at interest rates between 3,450% and 6,020%. The tax administration held that GAOS “has no structure or means to grant the loan and monitor compliance with its conditions … it does not have its own funds to lend, it receives them from other companies in the group”. The Administration refers to a loan received by GAOS from the parent company at a rate of 0%, which is paid in advance to receive another with an interest rate of 3.3%. The Administration indicates that “nobody, under normal market conditions, cancels a loan to constitute another one under clearly worse conditions”. The arm’s length interest rate was determined by reference to the interest rate RMSA would have paid to ... Read more
Poland vs Lender S.A, October 2013, Supreme Administrative Court, Case No II FSK 2297/11 - Wyrok NSA

Poland vs Lender S.A, October 2013, Supreme Administrative Court, Case No II FSK 2297/11 – Wyrok NSA

At issue in this case is the choice of method for determening interest rates on an intra group loan – More precisely whether or not internal comparables existed that were in fact independent. It is also discussed whether a intra group loan is comparable to a bank loan or not. Click here for translation II FSK 2297-11 - Wyrok ... Read more