Tag: vGA (verdeckte Gewinnausschüttung)

Germany vs A Investment GmbH, June 2017, Cologne Fiscal Court , Case no 10 K 771/16

Germany vs A Investment GmbH, June 2017, Cologne Fiscal Court , Case no 10 K 771/16

A Investment GmbH, acquired all shares of B in May 2012. To finance the acquisition, A Investment GmbH took up a bank loan with a interest rate of 4.78%, a vendor loan with an interest rate of 10% and a shareholder loan with an interest rate 8% from its parent company, Capital B.V. The 8 % interest rate on the shareholder loan was determined by A Investment GmbH by applying the CUP method based on external comparables. The German tax authority, found that the interest rate of 8 % did not comply with the arm’s length principle. An assessment was issued where the interest rate was set to 5% based on the interest rate on the bank loan (internal CUP). A Investment GmbH filed an appeal to Cologne Fiscal Court. The court ruled that the interest rate of the bank loan, 4.78%, was a reliable CUP for setting the arm’s length interest rate of the controlled loan. The vendor loan was ... Continue to full case
Germany vs. Corp. December 2012, Federal Tax Court 11.10.2012, I R 75/11

Germany vs. Corp. December 2012, Federal Tax Court 11.10.2012, I R 75/11

A GmbH agreed at year end to accept management charges from its Dutch parent for services performed during the year. The legal question was the relationship between arm’s-length principle as included in double tax treaties and income correction norms in German tax law. The court rejected a tax office assessment attempt on the basis of a hidden distribution of profits because of a delay in agreeing management charges in writing, saying that the double tax treaty related party provision bases the arm’s length standard on amount, rather than on the reason for, or documentation, of a transaction. Click here for translation Germany-vs-Corp-October-2012-BUNDESFINANZHOF-Urteil-IR-75-11- ... Continue to full case
Germany vs Trademark GmbH, November 2006, FG München, Case No 6 K 578/06

Germany vs Trademark GmbH, November 2006, FG München, Case No 6 K 578/06

A German company on behalf of its Austrian Parent X-GmbH distributed articles and products manufactured by the Austrian X-KG. By a contract of 28 May 1992, X-GmbH granted the German company the right to use the trade mark ‘X’ registered in Austria; According to the agreement the German company paid a license fee for the right. As early as 1991, X-GmbH had also granted X-KG a corresponding right; By a contract dated 1 July 1992, X-KG pledged to the applicant exclusive distribution rights for the Federal Republic of Germany. In the meantime, the mark ‘X’ had been registered as a Community trade mark in the Internal Market. The tax authorities dealt with the payment of royalties to X-GmbH for the years in question as vGA (hidden profit distribution). Click here for translation K 578-06 ... 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