Tag: Profit participating loan (PPL)

Luxembourg vs “Lux PPL SARL”, July 2021, Administrative Tribunal, Case No 43264

Lux PPL SARL received a profit participating loan (PPL) from a related company in Jersey to finance its participation in an Irish company.  The participation in the Irish company was set up in the form of debt (85%) and equity (15%). The profit participating loan (PPL) carried a fixed interest of 25bps and a variable interest corresponding to 99% of the profits derived from the participation in the Irish company, net of any expenses, losses and a profit margin. After entering the arrangement, Lux PPL SARL filed a request for an binding ruling with the Luxembourg tax administration to verify that the interest  charge under the PPL would not qualify as a hidden profit distribution subject to the 15% dividend withholding tax. The tax administration issued the requested binding ruling on the condition that the ruling would be terminate if the total amount of the interest charge on the PPL exceeded an arm’s length charge. Later, Lux PPL SARL received ... Read more
Switzerland vs "PPL AG", March 2020, Federal Supreme Court, Case No 2C_578/2019

Switzerland vs “PPL AG”, March 2020, Federal Supreme Court, Case No 2C_578/2019

“PPL AG” had been set up as a limited liability company and in addition to the ordinary share capital, “PPL AG” had issued non-voting shares (participation certificates) to its German parent company and to three German individual investors in an aggregate amount of CHF 1.82 million. “PPL AG” was later converted into a joint stock corporation and on that occasion the participation certificates were converted into Profit Participating Loans (PPL), with an annual interest rate of 7%. In 2015, the Swiss tax administration carried out a tax audit of “PPL AG” for the years 2010-2014 and issued an assessment claiming payment of CHF 94,000 in withholding taxes on constructive dividends. According to the tax administration “PPL AG” had paid excessive amounts of interest to its lenders under the PPLs, exceeding the safe harbour interest rates published by the Swiss tax administration for the years under review. According to the tax administration, the portion of the interest payments exceeding the published ... Read more
Switzerland vs "PPL AG", May 2019, Federal Court, Case No A-6360/2017

Switzerland vs “PPL AG”, May 2019, Federal Court, Case No A-6360/2017

“PPL AG” had been set up as a limited liability company and in addition to the ordinary share capital, “PPL AG” had issued non-voting shares (participation certificates) to its German parent company and to three German individual investors in an aggregate amount of CHF 1.82 million. “PPL AG” was later converted into a joint stock corporation and on that occasion the participation certificates were converted into Profit Participating Loans (PPL), with an annual interest rate of 7%. In 2015, the Swiss tax administration carried out a tax audit of “PPL AG” for the years 2010-2014 and issued an assessment claiming payment of CHF 94,000 in withholding taxes on constructive dividends. According to the tax administration “PPL AG” had paid excessive amounts of interest to its lenders under the PPLs, exceeding the safe harbour interest rates published by the Swiss tax administration for the years under review. According to the tax administration, the portion of the interest payments exceeding the published ... Read more