Tag: Start-up loss

Germany vs GmbH, February 1993, Bundesfinanzhof, Case No I R 3/92

Germany vs GmbH, February 1993, Bundesfinanzhof, Case No I R 3/92

The decision is about a German distribution company of international groups, which is in a continual overall loss position. This case established an important principle that: ‘… an orderly and diligent manager will, for the corporation managed by him, introduce to the market and distribute a new product only if he can expect, based on a prudent and pre-prepared economic forecast, a reasonable overall profit within a foreseeable period of time with due consideration to the predictable market development’. This decision covered the market introduction of a new product by an already established company and stated that typically a market introduction phase, losses should not be accepted for longer than three years. A later Bundesfinanzhof decision from 15 May 2002 stated that a start-up loss phase can be substantially longer on a case-by-case basis. Click here for translation Germany vs GmbH Feb 1993 ... Continue to full case