Tag: Low risk distributor

Germany vs Loss Destributor GmbH, April 2005, Bundesfinanzhof, I R 22/04

Germany vs Loss Destributor GmbH, April 2005, Bundesfinanzhof, I R 22/04

In this case, the Tax Court confirmed that losses incurred by a simpel distribution entity over a longer period of time trigger a rebuttable presumption in Germany that transfer prices have not been at arm’s length. A German company, Loss Destributor GmbH, imported goods from their Swiss sister company S-AG and had made continious losses over a period of time. The tax authorities found that the purchase prices paid to the S-AG had increased since 1989 and that the German company could not fully pass on the price increases to its customers. Since at the same time the price of the Swiss franc had fallen since 1989, the purchase prices paid to the S-AG in the years of the dispute had been inflated and currency gains had been transferred to Switzerland in this way. A tax assessment was therefor issued. The German company appeal the assessment to the Tax Court. The Federal Tax Court ruled in favor of the tax authorities. Click here for translation Bundesfinanzhof ... Continue to full case
Germany vs Clothing Distribution Gmbh, October 2001, BFH Urt. 17.10.2001, IR 103/00

Germany vs Clothing Distribution Gmbh, October 2001, BFH Urt. 17.10.2001, IR 103/00

A German GmbH distributed clothing for its Italian parent. The German tax authorities issued a tax assessment based on hidden profit distribution from the German GmbH in favor of its Italien parent as a result of excessive purchase prices, which led to high and continuous losses in Germany.  The tax authorities determined the arm’s length price based on purchase prices, which the German GmbH had paid to external suppliers. However, these purchases accounted for only 5% of the turnover. The German Tax Court affirmed in substance a vGA (hidden profit distribution) as the tax authorities had provided no proff of deviation from arm’s length prices. If a hidden profit distribution is to be accepted, the profit shall be increased by the difference between the actually agreed price and the price agreed by independent contractual parties under similar circumstances – the arm’s length price. Where a range of arm’s length prices is produced, there are no legal basis for adjustment to the ... Continue to full case