“Bf AG” had outstanding trade receivables from a sister company, “Leuchten GmbH”. These receivables were non-interest bearing. Following an audit for FY 2002-2004 the tax authorities issued an assessment where additional corporate income tax for FY 2002 to 2004 had been assessed. According to the tax authorities the lack of interest on the outstanding receivables constituted a hidden distribution of profits. The additional taxable income was determined by applying average interest rate to the outstanding amounts. A complaint was filed by “Bf AG” with the Tax Court. The Court decided in favour of tax authorities and found that similar terms would not have been granted to a unrelated company. An application for appeal was then filed by “Bf AG” with the Federal Tax Court. Judgement of the Federal Tax Court The Court allowed the appeal, set aside the decision of the Tax Court, and decided in favour of “Bf AG”. Excerpts “The case law of the highest courts on obvious ... Read more

“Lamps AG” had various transactions with related parties. These included outstanding trade receivables from a sister company for which no interest was charged, product transactions for which the price had been adjusted, and guarantee commissions paid to the parent company in connection with a shareholder loan. Following an audit, the tax authorities issued a notice of additional taxable income for the years 2002 to 2004. According to the tax authorities, the above transactions had not been priced at arm’s length and resulted in hidden distribution of profits. “Lamps AG” filed an appeal with the Tax Court. Judgment of the court. The Tax Court overturned the assessment with respect to the product pricing and the guarantee commission, but upheld the assessment with respect to the lack of interest on the outstanding trade receivables. The court concluded that the failure to pay interest was a consequence of the parties being under common control. Click here for English translation Click here for other ... Read more

In 2019, the Danish parent company of the group, EAC Invest A/S, had been granted a ruling by the tax tribunal that, in the period 2008-2011, due to, inter alia, quite exceptional circumstances involving currency restrictions in Venezuela, the parent company should not be taxed on interest on a claim for unpaid royalties relating to trademarks covered by licensing agreements between the parent company and its then Venezuelan subsidiary, Plumrose Latinoamericana C.A. The Tax tribunal had also found that neither a payment of extraordinary dividends by the Venezuelan subsidiary to the Danish parent company in 2012 nor a restructuring of the group in 2013 could trigger a deferred taxation of royalties. The tax authorities appealed against the decisions to the High Court. Judgement of the High Court The High Court upheld the decisions of the tax tribunal with amended grounds and dismissed the claims of the tax authorities. Excerpts: Interest on unpaid royalty claim “The High Court agrees that, as ... Read more