parties are in dispute as to whether the interest on a shareholder loan leads to a
a hidden distribution of profits for the plaintiff.
With the purchase agreement of
29 May 2012, the plaintiff (A GmbH [formerly: B GmbH]; hereinafter also referred to as "A GmbH") acquired all shares in A Verwaltungs GmbH.
"A GmbH") acquired all shares in A VerwaltungsGmbH from
GmbH from Mr A for a purchase price of € .... . The
A Verwaltungs-GmbH was at that time the sole shareholder of A
F... GmbH ("AF GmbH") and A Service GmbH ("AS GmbH"). The A
Verwaltungs-GmbH was merged with A GmbH by merger agreement dated ...2012.
with the merger agreement of ... 2012. The transfer date for tax purposes was 31 December
To finance the
A GmbH borrowed the following funds to finance the purchase price:
- ... € million
Bank loans (in total, syndicated loan agreement dated 28 June 2012 and
Loan Facility and Subordination Agreement of 29 June 2012)
- ... € million
Seller's loan (regulated under § 10 in the purchase agreement between Mr. A and
B GmbH dated 29 May 2012)
- ... m €
A GmbH took out the vendor loan and the bank loans directly.
borrowed. A GmbH received the shareholder loan from its sole shareholder, B Holding GmbH.
shareholder, B Holding GmbH, which in turn obtained external funds in the same
amount and under identical conditions from its shareholders,
- of G Holding ...
U.A., Netherlands in the amount of ... million,
- Mrs S in the amount
of ... € and
- Mr Y in the amount
of ... €
The loan agreements are dated 25 June 2012.
The loan conditions were as follows:
EUR ... million
TLA until 30.6.2017
EUR ... million
TLB until 30.6.2018
EUR ... million
EUR ... million
EUR ... million
According to 8.2 of the
(Bank) Loan Agreement, the interest margins stated are the maximum margins for a debt-equity ratio of ≥ 3.00.
maximum margins at a debt-equity ratio of ≥ 3.00. At a lower debt-equity ratio the
The interest margin decreases with a lower debt-equity ratio.
margin until 31.12.2012 is 3.5% p.a. for Facility A and Facility C and 3.75
Facility B 3.75% p.a.
In addition to the
In addition to the collateralisation of all of the plaintiff's assets, all of the shares of
B Holding GmbH in A GmbH have been pledged to the bank as collateral. Furthermore
Furthermore, G ... U.A. Netherlands has also pledged its claims from the granted
loan granted to the banks by way of security.
The interest rate of the
The interest rate on the syndicated loan averages 4.78%, which is undisputed between the parties.
This is undisputed between the parties.
For the further
For further details, reference is made to the aforementioned contracts and agreements.
The plaintiff filed the
1.8.2013, the applicant filed its corporate income tax return for 2012. In the enclosed
financial statements, it recognised an interest expense of ...
interest expense of ... EUR as operating expenses.
assessed the plaintiff in accordance with the declaration in a notice dated 9 January 2014. The assessment
was issued subject to review.
the tax office for large-scale and group tax audits U conducted an external
carried out an external tax audit. The auditor was of the opinion that
the interest rate of 8 % p.a. agreed in the loan agreement with the parent company was
p.a. agreed in the loan agreement with the parent company was not appropriate and should therefore be
(which was assumed to be 5%). This resulted in a
between the booked interest expense and an appropriate interest expense of ...
in theamount of ... EUR. The auditor regarded this as a
as a hidden profit distribution. For details, please refer to point 2.5 of the audit report of 2 December 2015.
of the audit report of 2 December 2015 and the opinion of the expert auditor.
(Annex 9 to the BP report).
The defendant followed the
the opinion of the tax audit and on 16 February 2016 issued a correspondingly
corporate income tax assessment for 2012.
The plaintiff contests this
The plaintiff challenges this with a jump action, which the defendant has agreed to. For
The plaintiff essentially argues in support of its case:
The conditions of the
The conditions of the shareholder loan were demonstrably in line with the arm's length principle.
Insofar as the defendant nevertheless and contrary to a benchmark study submitted to it
the defendant had denied the full deduction of interest expenses and, in the
the decision at issue, the decision is unlawful and unlawful because it is not
the decision was unlawful and infringed the applicant's rights.
The banks would have
attached certain conditions to the granting of external funds. In this respect
reference is made to p. 5 et seq. of the application.
The appropriateness of the
The appropriateness of the interest rate of 8% p.a. on the shareholder loan was based on the
benchmark study from February 2015, to which reference is made,
In this context, it should also be
It should also be taken into account that the loan by the seller, an unrelated third party, bears
third party, instead of 8%, bears interest at 10%,
although the vendor loan still had to be serviced with priority over the shareholder loan.
before the shareholder loan, which also speaks for the appropriateness of the conditions of the
of the shareholder loan.
Nor could it be
It cannot be argued that, due to the so-called backing in the group, an interest
interest on the subordinated shareholder loan could not be higher than the fully
than the fully senior secured loans of the bank consortium.
The BFH ruling of 21 December 1994 - I R 65/94 could not be applied to the present case.
be applied to the present case: Unlike in the case decided, there was borrowing from banks in the present case.
borrowing from banks. Furthermore, the controlling shareholder could not
influence the borrower, so that care could be taken for the repayment of the loan.
repayment of the loan could be ensured. The theoretical
theoretical possibilities under company law were in fact ruled out in this case due to the
the arrangements with the lending banks were in fact ruled out.
In its ruling of 24.
In its ruling of 24 June 2015 - I R 29/14, the Federal Supreme
that for a loan relationship to be recognised on the merits, it does not have to be
between affiliated companies need not be mandatory for the recognition of a loan relationship,
that collateral must be provided by the borrower. The BFH
expressly states that, in the absence of collateral, an appropriate risk
risk premium must be taken into account when determining the interest rate on the loan.
and, in the case of no collateralisation, on the basis of the group's retention and, if applicable, on the basis of the circumstances of the individual case.
and, if necessary, according to the circumstances of the individual case and the intensity of the collateralisation triggered by it, also in the context of an intra-group financing.
The interest rate should be increased by an appropriate risk premium.
amend the notice of change in corporation tax of 16 February 2016 with the proviso that no hidden
that no hidden profit distribution be taken into account in the reassessment of the
distribution of profits is taken into account.
dismiss the action
dismiss the action.
The BFH had ruled in
ruling of 21.12.1994 - I R 65/94 (BFHE 176, 571) that it is compatible with the arm's length principle that in the case of
the arm's length principle that no collateral is agreed in the case of a loan
group, because the group relationship ("retention") in itself does not
("retention") in itself constitutes sufficient security.
According to the BFH, the absence of actual collateral does not lead to an adjustment of the interest rate.
the interest rate, i.e. for the purpose of examining the interest rate, the group's
the retention in the group is to be recognised as an arm's length security.
In this regard, the
BMF letter of 29 March 2011, BStB11 2011, 277 in points 10 and 11:
According to the
case law of the BFH (judgements of 21.12.1994, I R 65/94 and of 29.10.1997, I
it is compatible with the arm's length principle that, in the case of a
no collateral is agreed in the case of a loan granted within the group because the
relationship (retention) in itself constitutes sufficient security.
constitutes sufficient security.
transfer price analysis of the intercompany loan by KPMG could not be followed.
be accepted. For the details, reference is made to the defendant's brief of 19 May 2016.
dated 19 May 2016 for further details.
Reasons for decision
The admissible action for annulment is unfounded.
The contested notice of change in corporation tax is lawful and therefore does not violate the applicant's rights.
the plaintiff's rights, cf. section 100 (1) sentence 1 of the
of the Fiscal Court Code - FGO -.
The defendant was
the difference between an appropriate interest rate of 5% and the actual interest of
The defendant was right to assume a hidden profit distribution -vGA- in the amount of the difference between an appropriate interest rate of 5% and the actual interest paid of 8% and to record this as a tax increase.
1. art. 6 of the
Convention between the Federal Republic of Germany and the Kingdom of the
Netherlands for the avoidance of double taxation in the field of taxes on income and on
taxes on income and on capital and on various other taxes, and for the
other questions in the field of taxation of 16 June 1959 - DBA-Netherlands -, which
DBA-Netherlands -, which was still in force in the year in dispute 2012, bars the application of the legal
the legal concept of a hidden distribution of profits in the case in dispute (this is also the
also the FG Münster in its ruling of 7.12.2016 - 13 K 4037/13 K, F,
Decisions of the Fiscal Courts 2017, 334, BFH - Az.: I R 4/17 incidental
from; a .A. Engers/Stevens in Wassermeyer,
DBA, DBA-Netherlands, Art. 9 marginal no. 7 [as at: July
2016]). In its ruling of 11.10.2012 - I R 75/11(BStBl II 2013, 1046), the Federal Fiscal Court decided that the
principle of "dealing at arm's length" under treaty law only has a blocking
only has a blocking effect on the so-called special
special conditions to which controlling companies are subject in the context of the
to which controlling companies are subject in the context of the income correction
are subject to within the scope of the income adjustment. Profit adjustments that only extend to the appropriateness (amount) of what is
of the agreed amount are not covered by the blocking effect(para. 11 of the aforementioned ruling). In the case in dispute
only the question of the appropriateness of the amount of the agreed interest rate.
2. a vGA within the meaning of section 8 (3) sentence 2 KStG is understood to mean, in the case of a corporation
is to be understood as a reduction in assets or a prevented increase in assets which is
is caused by the corporate relationship, has an impact on the amount of the
the amount of the difference pursuant to section 4 subsection 1 sentence 1 EStG in conjunction with section 8 subsection 1 KStG.
in conjunction with § 8 para. 1 KStG and has no connection with an open distribution.
distribution; a further prerequisite for the assumption of a vGA is that the reduction in the differential amount has the
has the objective suitability to cause the shareholder to receive other benefits within the meaning of § 20 para.
para. 1 no. 1 sentence 2 EStG. The latter is always affirmed if the shareholder has a
shareholder can dispose of a specific, measurable good in money or money's worth.
can dispose of it. For the majority of the cases decided, the Federal
Federal Fiscal Court has assumed that the inducement is due to the corporate relationship,
if the corporation grants a pecuniary advantage to its shareholder or a person closely
or a person close to the shareholder a pecuniary advantage that he or she would have
manager, it would not have granted to a non-shareholder (see also
non-shareholder (BFH judgement of 23 February 2005 - I R
70/04, BFHE 209, 252, BStBl II 2005, 882, of 9.
November 2005 I R 89/04, BFHE 211, 287, BStBl.
II 2008, 523, BFH decision of 17 March 2010 I R 19/09, BFH/NV 2010,
1310 with reference to BFH ruling of 25 May 2004 VIII R 4/01, BFHE
207, 103, BFH/NV 2005, 105, DStR 2004, 2143). The yardstick
for the arm's length comparison to be made is the actions of a prudent and
of a prudent and conscientious manager who, in accordance with § 43 subsection 1 GmbHG
the diligence of a prudent businessman (cf. BFH judgements of
4 March 2009 - I R 45/08, BFH/NV 2010, 244, HFR 2010, 169, of 6 April
2005 I R 10/04, BFH/NV 2005, 2058).
Taking into account the above definition, a hidden distribution of profits exists in the
distribution of profits, since the loan agreement between the plaintiff and its parent company
and its parent company does not stand up to an arm's length comparison with regard to the interest rate.
stand up to an arm's length comparison.
a) The plaintiff has
paid an average of 4.78% interest on the loan taken out with the banking syndicate.
interest rate. This is the benchmark against which the interest rate for the loan taken out by the
the interest rate on the loan taken out by the parent company.
the conditions of this loan cited by the applicant do not mean that the interest rate
agreed with the banking syndicate as a standard of comparison.
The defendant correctly points out in this regard that through § 39 para. 1
No. 5 InsO in the version of the Act to Modernise the Law on Private Limited Companies
law and to combat abuses(MoMiG) the subordination of
the subordination of claims arising from shareholder loans and economically
equivalent legal acts. This subordination cannot be
cannot be undermined by the granting of collateral. Consequently
Consequently, neither the non-granting of collateral nor the subordinate
subordination of shareholder loans can justify a risk surcharge when determining the
The defendant further
further rightly point out that there was in fact sufficient substance in the plaintiff's
sufficient substance in the applicant's assets to serve as a guarantee to the parent company that the loan would be repaid,
that the loan would be repaid. The purchase price for the shares which
The purchase price for the shares for the acquisition of which the loans were taken amounted to ... million
€. If one assumes that the purchase price corresponds to the actual value
value (the parties involved do so and there is no reason to doubt this opinion), the
the banking syndicate could only have recourse to the collateral in the amount of € .... million
million. The excess amount was available to the parent company as "collateral".
available to the parent company.
b) For the amount of the
The legal concept of the so-called retention in the group plays a role for the
at least in the case of loans granted by the parent company to the subsidiary company.
subsidiary (see in this respect the judgement of the recognising senate of 8.5.2013 - 10 K 1172/12,
marginal no. 37, juris), so that this legal
this legal figure must be left out of the calculation of the arm's length interest rate.
must be left out.
c) That the loan granted by the
the seller of the shares, a third party, bears interest at 10%.
interest rate is irrelevant. The amount of this interest rate can be determined by the
either the seller's or the buyer's interest in not paying the purchase price immediately.
immediate payment of the purchase price. The interest rate may also be
also may have been agreed to compensate for a lower purchase price.
These possibilities show that this interest rate, in contrast to the one agreed with the
agreed with the banking syndicate, this interest rate cannot be a connecting factor.
c) In the opinion of the
the Senate, an expert opinion prepared after the event cannot prove the
the interest rate if loan agreements were actually concluded with third parties.
third parties were concluded.
The decision on costs is based on section 135(1) of the FGO.
The Senate allows the
appeal pursuant to § 115 para. 2 no. 1 FGO, in particular due to the question of the so-called retention
at retention in the group
on the amount of the interest rate