A German GmbH formed a provision for a liability claim under §73 AO relating to its parent company's corporation tax debts and sought to deduct the amount. The tax authority disallowed the deduction, treating it as a non-deductible tax expense. The Bundesfinanzhof upheld the authority's position in 2018, ruling the expense constituted a verdeckte Gewinnausschüttung (hidden profit distribution) rather than falling under the §10 No.2 KStG deduction prohibition ... Read more

A German holding company financed an acquisition using a shareholder loan at 8% interest, determined via external CUP comparables. The German tax authority challenged the rate, applying the internal bank loan rate of 4.78% instead. The Cologne Tax Court upheld the authority's position in 2017, finding the bank loan a reliable internal CUP and rejecting risk premiums for subordination, given implicit group support under German insolvency law ... Read more

A German freight company entered a written agreement at year-end to pay management fees to its Dutch parent for services already received. The German tax authority challenged the arrangement as a hidden distribution of profits due to its retrospective nature. The Federal Tax Court rejected this assessment in 2012, ruling that double tax treaty arm's length provisions address the amount of a transaction, not the reason for or timing of its documentation ... Read more

A German subsidiary paid licence fees to its Austrian parent for use of a trademark registered in Austria. The German tax authority treated these royalty payments as hidden profit distributions. The Bundesfinanzhof upheld the tax authority's assessment in 2007, dismissing the taxpayer's appeal and confirming that the payments lacked arm's length justification under German transfer pricing rules ... Read more

A German subsidiary paid licence fees to its Austrian parent company for use of a registered trademark under a 1992 agreement. The German tax authorities reclassified these royalty payments as hidden profit distributions (vGA). The FG München upheld the tax authority's position in November 2006, finding the licence fees constituted a concealed distribution of profits rather than arm's length remuneration ... Read more

A German GmbH distributing clothing for its Italian parent faced hidden profit distribution assessments after sustained losses. The German Federal Tax Court found the tax authority failed to prove deviation from arm's length prices and held that where an arm's length range exists, adjustment must favour the taxpayer, not the median. Losses exceeding three years trigger only a rebuttable presumption of non-arm's length pricing ... Read more