Tag: Related-party loan

Luxembourg vs Lender Societe, July 2019, Cour Administratif, Case No 42083

Luxembourg vs Lender Societe, July 2019, Cour Administratif, Case No 42083

Lender Societe had acquired real estate in 2008 for EUR 26 million. The acquisition had been financed by a bank loan of EUR 20 million and a shareholder loan of EUR 6 million. The interest rate on the shareholder loan was set at 12%. The Tax Authorities found that the “excessive” part of the interest paid on the shareholder loan was as a hidden distribution of profit subject to dividend withholding tax. The hidden profit distribution was calculated as the difference between an arm’s length interest rate set at approximately 3% and the interest rate according to the loan agreement of 12%. Lender Societe disagreed with the assessment and brought the case before the Tribunal Administratif. The Tribunal agreed with the Tax Authorities and qualified the excessive interest payments as a hidden profit distribution subject to a 15% dividend withholding tax. The decision of the Tax Tribunal is affirmed by the Cour Administratif. Click here for translation Luxembourg vs S.A 17 July 2019 Case No 42043C ... Continue to full case
Germany vs G GmbH, February 2019, Bundesfinanzhof, Case No IR 81/17

Germany vs G GmbH, February 2019, Bundesfinanzhof, Case No IR 81/17

A German company, G GmbH, owned 50% of A GmbH resident in Austria. The remaining 50% were held by non related shareholders, who at the same time acted as managing directors of A GmbH. G GmbH granted A GmbH a total of five loans with a duration of between nine and 362 days for a total amount of EUR …. The loans each bore interest at 5.5% pa. For security, different machines were assigned. In addition, by a contract dated 9 April 2003, G GmbH assumed a guarantee of EUR … for a loan from B Bank in Austria to A GmbH. On 22 January 2002 A GmbH made a partial payment in the amount of … EUR and on 16 June 2002 a further partial payment in the amount of … EUR back to G GmbH. Due to negative development in A GmbH, G GmbH on 31 December 2003, booked a partial depreciation on the loan in the amount ... Continue to full case
Germany vs G KG, February 2019, Bundesfinanzhof, Case No IR 51/17

Germany vs G KG, February 2019, Bundesfinanzhof, Case No IR 51/17

G KG, in which G GmbH a limited partner, was the sole shareholder of the Chinese A Ltd. In 2007 and 2008, a claim in the amount of EUR …, which still came from deliveries in the years 2004 and 2005, was open to this company. The claim was unsecured and interest-free. On December 20, 2007, the plaintiff waived EUR 1.00 against its debtor warrant against debtor warrants and, to this extent, booked these off in its trade balance. On 30 June 2008, the plaintiff wrote off the claim for continued worthlessness in its trade balance by EUR … and finally declared a debt waiver on 6 December 2008. The defendant and appellant (the Finanzamt – FA–) did not take into account the value adjustments in the context of the separate and uniform determination of the taxable amount and increased the profit due to the lack of interest on the receivable off balance sheet in the amount of 3% of ... Continue to full case
Luxembourg vs Lender Societe, November 2018, Tribunal Administratif, Case No 40348

Luxembourg vs Lender Societe, November 2018, Tribunal Administratif, Case No 40348

Lender Societe had acquired real estate in 2008 for EUR 26 million. The acquisition had been financed by a bank loan of EUR 20 million and a shareholder loan of EUR 6 million. The interest rate on the shareholder loan was set at 12%. The Tax Authorities found that the “excessive” part of the interest paid on the shareholder loan was as a hidden distribution of profit subject to dividend withholding tax. The hidden profit distribution was calculated as the difference between an arm’s length interest rate set at approximately 3% and the interest rate according to the loan agreement of 12%. Lender Societe disagreed with the assessment and brought the case before the Tribunal Administratif. The Tribunal agreed with the Tax Authorities and qualified the excessive interest payments as a hidden profit distribution subject to a 15% dividend withholding tax. Click here for translation Luxembourg vs Societe 071018 tribunal administratif du Luxembourg No 40348 ... Continue to full case
France vs. SOCIETE D'ACQUISITIONS IMMOBILIERES, Jan 2010, CE, No. 313868

France vs. SOCIETE D’ACQUISITIONS IMMOBILIERES, Jan 2010, CE, No. 313868

In the Société d’acquisitions immobilières case the interest rate charged to a subsidiary was considered comparable with the interest rate the French entity would receive from a third party bank for an investment similar in terms and risk. The Court decided that the cash advance granted by a sub-subsidiary to its ultimate parent with which it had no business relations could constitute an “abnormal act of management” if the amount lent is clearly disproportionate to the creditworthiness of the borrowing company. Click here for translation France vs SOCIETE D'ACQUISITIONS IMMOBILIERES 22 Jan 2010 CE no 313868 ... Continue to full case