BFH v. 17.12.2014 - I R 23/13 BStBl 2016 II p. 261
Blocking effect of Art. 9, para. 1 DBA-USA 1989
on income adjustment pursuant to § 1, para. 1 AStG (old
version) in the case of partial value depreciation as a result of a loan issued
without collateralisation
Guiding principle
1. Partial write-downs on shareholder loans are
not profit reductions that are not to be taken into account in the
determination of profits within the meaning of section 8b(3) KStG 2002 in the version until the amendment by the JStG 2008 (confirmation of the Senate ruling of 14 January
2009, I R 52/08, BFHE 224, 132, BStBl II 2009, 674).
2.
2. The principle of "dealing at arm's
length" according to Article 9, para. 1 OECD-MustAbk
(here: according to Article 9, para. 1 DBA-USA 1989) only allows for an income
correction according to the national provisions of the Contracting States (here
according to § 1, para. 1 AStG in the version of the StVergAbG of 16 May 2003) if the price agreed between the
affiliated companies (here: an interest rate on a loan) does not stand up to
the arm's length standard in terms of its amount, i.e. its appropriateness.
However, it does not allow for the correction of a write-down to be made
(pursuant to section 6(1) no. 2 sentence 2 EStG 2002)
on the partial value of the claim for repayment of the loan proceeds and on
interest arrears because the domestic parent company issued the loan to its
foreign (here: US) subsidiary in an unsecured manner that is not customary for
an arm's length transaction (deviation from the BMF letter of 29 March 2011, BStBl I 2011, 277, para. 3). 3.
3. Whether the partial write-down of the
repayment claims is justified due to the lack of collateralisation
is (also) determined according to the standards of the so-called group
retention (in this respect, confirmation of the BMF letter of 29 March 2011, BStBl I 2011, 277, there margin no. 13).
Laws: AStG (in the
version of the StVergAbG of 16 May 2003) AStG (in the version of the StVergAbG
of 16 May 2003) § 1 para. 1 and 4DBA USA 1989 Art. 9 para. 1Protocol to DBA USA
1989 No. 7 Protocol to DBA USA 1989 No. 7EStG 2002 § 6 para. 1 No. 2 sentence
2KStG 2002 (in the version of JStG 2008) § 8b para. 3
Instances: FG Berlin-Brandenburg of 30 January
2013 12 K 12056/12 (EFG 2013, 1560) BFH I R 23/13 (course of proceedings), BFH
- I R 23/13, course of proceedings
Reasons
I.
1 The plaintiff and appellant (plaintiff), a
limited liability company (GmbH), is the legal successor of C-GmbH by virtue of
the merger on 31 December 2007. C-GmbH was the sole shareholder of I-GmbH and
affiliated to it as the controlling company within the framework of a tax group
relationship pursuant to §§ 14 et seq. of the Corporation Tax Act 2002 (Körperschaftsteuergesetz 2002 - KStG
2002) and § 2 para. 2 sentence 2 of the Trade Tax Act 2002 (Gewerbesteuergesetz
2002 - GewStG 2002).
2 In 2000, I-GmbH, together with another
company, founded a US corporation, H-Inc., in which I-GmbH held 60 per cent of
the shares, in order to open up the US market. H-Inc. was provided with equity
capital by the two shareholders. It also received a bank loan of approximately
1.5 million US dollars (USD), which the partners secured by guarantees. As of
31 December 2003, the balance sheet of H-Inc. showed a deficit not covered by
equity in the amount of approximately USD 950,000. On 30 June 2004, the other
shareholder withdrew; since then, I-GmbH was the sole shareholder of H-Inc. The
bank then called in the loan granted to H-Inc. As the latter was not in a
position to service the bank loan, C-GmbH paid on the loan claim. As at 31
December 2004, the balance sheet of H-Inc. then showed a deficit not covered by
equity in the amount of approximately USD 450,000, which increased to
approximately USD 1.6 million as at 31 December 2005, to approximately USD 2.5
million as at 31 December 2006 and to approximately USD 3.5 million as at 31
December 2007.
3 In the years in dispute 2004 to 2007, I-GmbH
granted its US subsidiary unsecured loans of € 261,756.22 (2004), € 1,103,140
(2005), € 158,553.39 (2006) and € 75,000 (2007) with an annual interest rate of
5%, which were to be repaid from the liquidity of future profits of H-Inc.
Already in the respective year of their granting, the loan receivables were
individually value adjusted (2004 in the amount of € 261,052, 2005 in the
amount of € 1,103,140, 2006 in the amount of € 158,000, 2007 in the amount of €
75,000).
4 The tax office responsible for the taxation
of I-GmbH recognised the value adjustments of the loan receivables on the
merits, but, with reference to the letter of the Federal Ministry of Finance
(BMF) of 29 March 2011 (BStBl I 2011, 277) - in the
years 2004 to 2006 in each case in the full amount, in 2007 in the amount of €
30. 800 - to the income pursuant to § 1 of the Act on the Taxation of Foreign
Relations (Foreign Tax Act) in the version of the Act on the Reduction of Tax
Concessions and Exemptions (Tax Concession Reduction Act -StVergAbG-)
of 16 May 2003 (Federal Law Gazette I 2003, 660, Federal Tax Gazette I 2003,
321) -AStG a.F.- that was
decisive for the years in dispute. The defendant and appellant (Finanzamt -FA-) issued corresponding notices on corporation
tax and trade tax assessment amounts to the plaintiff as the legal successor of
the former controlling company, C-GmbH.
5 The subsequent action was unsuccessful. The
Berlin-Brandenburg Fiscal Court (Finanzgericht, FG)
dismissed it as unfounded in its ruling of 30 January 2013 12 K 12056/12. The
judgement is printed in Entscheidungen der Finanzgerichte (EFG) 2013, 1560.
6 The plaintiff bases its appeal on a violation
of substantive law. It requests that the judgement of the Fiscal Court be set aside
and that the contested notices be amended to the effect that the addition of
income pursuant to § 1 AStG old version in the amount
of €261,052 in 2004, in the amount of €1,103,140 in 2005, in the amount of
€158,000 in 2006 and in the amount of €30,800 in 2007 is waived.
7 The FA requests that the appeal be rejected.
8 The Federal Ministry of Finance joined the
appeal proceedings. It agrees with the FA on the merits, but does not file an
application.
II.
9 The appeal is well-founded. It leads to the
annulment of the contested judgement of the Fiscal Court and to the remittal of
the case to the Fiscal Court. The FA and the tax court were wrong in their
conclusion that a partial write-off of the repayment claims from the issued
loans and the claims due to the interest arrears as a result of the failure to
provide collateral triggers an income adjustment pursuant to § 1 (1) of the old
version of the German Income Tax Act (AStG) aimed at
reversing the write-off. However, further clarification of the facts is required,
on the one hand, as to whether the agreed interest rate was appropriate, on the
other hand, as to whether the corresponding loan and interest receivables
should be capitalised as such and, if so, whether the
write-offs to the lower partial values were justified. Without these findings
of the court of facts, it cannot be recognised.
10 1 The parties involved agree that C-GmbH and
I-GmbH were affiliated in the years in dispute (pursuant to § 14 KStG 2002, § 2 para. 2 sentence 2 GewStG
2002). The senate has no reason to question the underlying factual
circumstances and the legal effects based thereon. 11 2.
11 2. on 31 December of each of the years in
dispute, I-GmbH capitalised repayment claims against
H-Inc. arising from the loans issued to it and then at the same time wrote down
the partial value of these claims in accordance with § 6 (1) no. 2 sentence 2
in conjunction with § 6 (1) no. 1 sentence 2 of the Trade Tax Act 2002. §
Section 6 (1) no. 1 sentence 3 of the Income Tax Act 2002 (EStG
2002), here in conjunction with Section 8 (1) KStG. §
8 section 1 KStG 2002 and in accordance with § 7
sentence 1 GewStG 2002. The parties involved disagree
(again in the meantime) as to whether the write-downs to the going-concern
value were justified. The court left this unanswered because a corresponding
(off-balance sheet) income adjustment was not required under § 8b, para. 3 KStG 2002 in the version until the amendment by the Annual
Tax Act 2008 of 20 December 2007 (BGBl I 2007, 3150, BStBl I 2008, 218), but at least under § 1, para. 1 AStG, old version, and the effects of the partial
write-downs were thus to be reversed. The latter is not to be agreed with in
principle. However, further clarification of the facts is required.
12 a) The expenses from the partial write-downs
(assumed here to be in conformity with the rules) are indeed not to be added
off balance sheet to increase income pursuant to § 8b (3) KStG
2002, old version. The facts are missing. The Senate refers - in this respect
also in agreement with the parties involved and in order to avoid repetitions -
to its judgement of 14 January 2009 I R 52/08 (BFHE 224, 132, BStBl II 2009, 674), which the X. Senate of the Federal
Fiscal Court (Bundesfinanzhof, BFHE 224, 132, BStBl
II 2009, 674) followed. Senate of the Federal Fiscal Court (Bundesfinanzhof,
BFH) in its ruling of 18 April 2012 X R 5/10 (BFHE 237, 106, BStBl II 2013, 785) for the parallel regulatory situation
in this respect under section 3c(2) sentence 1 EStG
2002.
13 b) Whether and to what extent § 1 AStG old version leads to an income correction cannot be
conclusively answered at present.
14 aa) If a taxpayer's income from business
relations with a related party is reduced because, in the context of such
business relations with a foreign country, the taxpayer agrees terms and
conditions that differ from those that would have been agreed by unrelated
third parties under the same or similar circumstances, his income is to be
assessed according to § 1, para. 1 AStG old,
irrespective of other provisions, as it would have been under the terms and
conditions agreed between unrelated third parties. According to § 1, para. 2,
no. 1 AStG old, a person is related to the taxpayer
if, among other things, the person has a direct or indirect interest (significant
interest) in the taxpayer or can directly or indirectly exercise a controlling
influence on the taxpayer or, conversely, the taxpayer has a significant
interest in the person or can directly or indirectly exercise a controlling
influence on this person. A business relationship within the meaning of
paragraphs 1 and 2 is, according to § 1 (4) AStG old
version, any relationship under the law of obligations on which the income is
based, which is not an agreement under the articles of association and which is
part of an activity either with the taxpayer or with the related person to
which §§ 13, 15, 18 or § 21 of the Income Tax Act are applicable or, in the
case of a foreign related person, would be applicable if the activity were
carried out in Germany (in this respect, deviating from the previous version of
the regulations, cf. in this respect, in relation to shareholder loans, Senate
ruling of 23 June 2010, I R 37/09, BFHE 230, 156, BStBl
II 2010, 895, with further references).
15 bb) In the case in dispute, it is
controversial among the parties in several respects whether the conditions of §
1(1) AStG old version triggering the correction, as
determined here, exist and, if so, whether they comply with higher-ranking law:
Firstly, whether the lack of collateralisation of the
loan issued by I-GmbH to the US-American H-Inc. is a condition within the
meaning of the law; secondly - if the answer is affirmative - whether the lack
of collateralisation and the consequently triggered
partial value depreciation pursuant to § 6 para. 1 no. 2 sentence 2 EStG 2002 is causal ("as a result") for the
reduction in income as a shift of profits abroad, and thirdly, whether this
complies with the principle of equal taxation in terms of both constitutional
and EU law (cf. Court of Justice of the European Union, judgment of 21 January
2010 C-311/08, SGI, [2010] ECR I-487). In some cases, these questions are
answered in the affirmative (e.g. - in line with the previous instance - by the
Thuringian Tax Court, judgement of 29 January 2014 3 K 43/13, EFG 2014, 1401),
in some cases in the negative (e.g. by the Düsseldorf Tax Court, judgement of
28 March 2014 6 K 4087/11 F.). March 2014 6 K 4087/11 F, EFG 2014, 1275; also
e.g. von Ditz/ Quilitzsch, Internationale
Steuer-Rundschau -ISR- 2014, 109, 113; Ditz in Schönfeld/Ditz, DBA, Art. 9 OECD-MA Rz 18 et seq, 19, and
von Andresen, Internationales Steuerrecht
-IStR- 2014, 207, in each case with further
references).
16 cc) The Senate leaves this aside. It agrees
with the plaintiff, at least in principle, with regard to the question of the
lack of collateralisation for a different reason.
Even if all the requirements of § 1, para. 1 of the old version of the German
Income Tax Act (AStG) were fulfilled, a correction of
income due to the lack of collateralisation of the
loan would have to be ruled out because it would not be compatible with the
relevant treaty situation in the case at issue in accordance with Article 9,
para. 1 of the Convention between the Federal Republic of Germany and the United
States of America for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with respect to Taxes on Income and on Capital and Certain Other
Taxes of 29 August 1989 (Federal Law Gazette II 1991, 355, Federal Tax Law
Gazette I 1991, 95) - DTA-USA 1989 - and with the arm's length standard
specified therein.
17 aaa) Article 9,
para. 1 DBA-USA 1989 corresponds to Article 9, para. 1 of the Model Convention
of the Organisation for Economic Cooperation and
Development - OECD Model Convention (OECD-MustAbk) -
and contains profit adjustment provisions comparable in content to § 1, para. 1
AStG old. and contains profit adjustment provisions
comparable in content to section 1 (1) AStG old for
enterprises associated with one another ("dealing at arm's length"):
If an enterprise of a Contracting State directly or indirectly participates in
the management, control or capital of an enterprise of the other Contracting
State, or if the same persons directly or indirectly participate in the
management, control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State, and in these cases the two
enterprises are bound in their commercial or financial relations by agreed or
imposed conditions which differ from those which independent enterprises would
agree with each other, the profits which one of the enterprises would have
earned without these conditions but did not earn because of these conditions
may be attributed to the profits of this enterprise and taxed accordingly.
18 bbb) As such, the
agreement provision does constitutively determine the arm's length standard.
However, it requires a domestic legal basis which, for its part, enables the
adjustment of profits in accordance with Article 9, para. 1 DBA-USA 1989; the provision
- as a provision under treaty law - serves to delimit profits, but not to
(directly) adjust profits (no so-called "self-executing effect").
Article 9, para. 1 DBA-USA 1989 thus only defines the "framework" and
the conditions under treaty law for the profit adjustments to be made. At the
same time, the provision has a limiting effect as a manifestation of the
so-called "barrier effect" of the treaty: even if Article 9, para. 1
DBA-USA 1989 does not create correction possibilities for the state applying
the treaty, it does "block" more far-reaching, domestically
permissible correction possibilities of that state for its scope of
application. Only in this way - by means of a uniform and binding assessment
standard for both contracting states - can it be achieved that the
objectionable prices and price components are not recorded twice in the
individual states (see Eigelshoven in Vogel/Lehner,
DBA, 6th edition, Art. 9 margin no. 18 ff., 20).
19 ccc) In its ruling of 11 October 2012, I R
75/11 (BFHE 239, 242, BStBl II 2013, 1046), the
Senate recognised that the principle of "dealing at arm's length"
under treaty law has a blocking effect in the case of associated companies in
relation to the so-called special conditions to which controlling companies are
subject in the context of the income adjustment under section 8(3) sentence 2 KStG 2002 when a hidden profit distribution is assumed. The
main consideration of this decision is that the relevant standard of comparison
in Art. 9 para. 1 OECD-MustAbk only those (factual)
circumstances are included which have an effect on the said "economic or
financial conditions", i.e. which affect the appropriateness (amount) of
what has been agreed; a profit adjustment which not only extends to the
appropriateness (amount) of what has been agreed, but - in a two-stage
procedure - also to its "reason" (customary nature of the conditions,
seriousness), is alien to the comparative standards of "dealing at arm's
length" as the subject of the appropriateness test. These standards of
comparison are - if only to prevent the threat of double taxation in both the
one and the other contracting state in the absence of a corresponding
counter-correction - subject to a treaty-specific and thus uniform
understanding of the term, which precludes domestic modifications of the arm's
length concept ex ante. In order to avoid repetitions, reference is made to the
reasons of the judgement, which the Senate adheres to.
20 ddd) What was said
in that judgement on the relationship between Article 9, para. 1 OECD-MustAbk and § 8, para. 3, sentence 2 KStG
2002 applies to the same extent to the relationship between Article 9, para. 1
OECD-MustAbk and § 1, para. 1 AStG
old version; there are no indications which could justify a different
assessment in principle here, and this principle aims to correlate the
reduction in profit suffered with the conditions imposed or agreed. Here, too,
an income adjustment can therefore only be considered if the agreed price does
not stand up to the arm's length standard in terms of its amount, i.e. its
appropriateness. Admittedly, the term "agreed conditions" in Art. 9
(1) OECD-MustAbk basically covers everything that is
the subject of commercial and financial relations and thus the subject of the
exchange of services under the law of obligations between the associated
enterprises, so that all other terms and conditions are included in addition to
the price (cf. e.g. Ditz in Schönfeld/Ditz, loc. cit, Art. 9 OECD-MA, marginal no. 47; Wassermeyer,
DBA, MA Art. 9, marginal no. 62; Wolff, same, USA Art. 9, marginal no. 28; Oestreicher in Endres/Jacob/Gohr/Klein,
DBA Germany/USA, 2009, Art. 9, marginal no. 21, see also marginal no. 13 et
seq.) It remains the case, however, that the agreement conditions only have an
effect before the principle of the standard of review laid down in Art. 9 (1)
OECD-MustAbk insofar as their "quality"
influences the interest rate level "upwards" or "downwards"
in an arm's length comparison (likewise e.g. Ditz/Quilitzsch,
ISR 2014, 109, 113; Ditz in Schönfeld/Ditz, loc.cit., Art. 9 OECD-MA marginal no. 18 ff, 19, 46 f.;
Andresen, IStR 2014, 207, both with further
references; see also Oestreicher in Endres/Jacob/Gohr/Klein, ibid.); in this respect, the conditions always
(only) form the basis for the review of transfer prices (see Eigelshoven in Vogel/Lehner, loc. cit,
Art. 9 margin no. 50 f.; unclear and possibly different Wassermeyer
in Flick/Wassermeyer/Baumhoff/Schönfeld, Außensteuerrecht, § 1 AStG margin no. 107 ff. on the one hand, margin no. 98 ff. and
117 on the other).
21 eee) Contrary to
the assumption of the FA and (presumably also) of the BMF, which joined the
proceedings, the DBA-USA 1989 applicable in casu and
in this case its Article 9, para. 1 as well as No. 7 of the Protocol of 29
August 1989 (BGBl II 1991, 378, BStBl
I 1991, 107), which was agreed on, do not change this. According to this
Protocol, each Contracting State may apply the provisions of its domestic law
according to which income, deductible amounts, tax credits or allowances are to
be apportioned or allocated between associated persons in order to apportion or
allocate deductible amounts, tax credits or allowances according to the general
principles of Article 9, para. 1 DBA-USA 1989. Art. 9 DBA-USA 1989 is not to be
interpreted as restricting a Contracting State in the apportionment of income
between persons who are connected with each other in a manner other than by
direct or indirect participation within the meaning of para. 1 (for example, by
commercial or contractual relationships resulting in controlling influence);
however, the apportionment must otherwise comply with the general principles of
Art. 9, para. 1 DBA-USA 1989.
22 Art. 9, para. 1 DBA-USA 1989 therefore
"does not have a 'blocking effect' with regard to the manner of
adjustments between associated enterprises and the adjustment of income between
enterprises or persons that are associated in a manner other than according to
the criteria specified in Art. 9, para. 1" (Wolff in Wassermeyer,
loc. cit., USA Art. 9, marginal no. 42). The provision is aimed at correcting
the income of a business relationship between related parties that is not
remunerated at arm's length and thus allows, for example, a profit correction
in Germany (also) under the conditions of § 1 para. 2 no. 3 AStG
old. However, it remains the case that such a correction is only permissible if
it is made in accordance with the arm's length principle in the sense described
above. The "blocking effect" triggered by Article 9, para. 1 DBA-USA
1989 in this respect is therefore not influenced or cancelled (likewise e.g.
Ditz in Schönfeld/Ditz, loc. cit., Art. 9 OECD-MA
marginal no. 186; Eigelshoven in Vogel/Lehner, loc.
cit., Art. 9 marginal no. 146), and this then also applies to corrections in
accordance with § 1, para. 1 AStG old version.
23 dd) Conditions that have been agreed within
the scope of a business relationship between associated enterprises can
therefore, in accordance with the correction standard permissible under treaty
law, as a rule only have an effect on the income correction to be made in
accordance with § 1, para. 1 AStG, old version, if
they have an actual influence on the amount of the performance conditions. In
individual cases, this also includes the risks resulting from a lack of loan collateralisation. However, the situation may be different
under the circumstances of the so-called group retention, which is also
relevant in principle in the case in dispute, and which describes all
advantages of a company that result solely from belonging to the group of
companies. In the case of such retention, compensation through the agreed
interest rate may be unnecessary as long as the controlling shareholder ensures
the solvency of the company, i.e. as long as it meets its external obligations.
Also according to the BMF (in the aforementioned letter in BStBl
I 2011, 277), the group retention is to be recognised as an arm's length
security for the examination of the interest rate and the absence of an agreed
security should not lead to an adjustment of the interest rate; the group
retention in itself represents sufficient security (cf. on this also e.g. Benz/Böing, Die Unternehmensbesteuerung
2012, 440; Looks/Birmans/Persch, Der Betrieb 2011, 2110; Roser, GmbH-Rundschau 2011, 841; Nientimp/Langkau, Internationale Wirtschafts-Briefe 2011, 351; V. Schmidt, Neue Wirtschafts-Briefe, Beilage
33/2011, 3; Wassermeyer in Flick/Wassermeyer/
Baumhoff/Schönfeld, loc. cit, § 1 AStG margin no. 108).
24 ee) Whether this
is the case in the case in dispute and in what comprehensible manner the
agreement on the interest came about at all was not established by the Fiscal
Court. It did take up the concerns of the FA (now also shared by the Federal
Ministry of Finance), but then left this aside. The clarification of the facts
must be made up for on this point, which is why the ruling of the lower court,
which essentially held a different legal opinion than the Senate, must be set
aside and the case referred back to the Fiscal Court.
25 c) Either way, an income correction made
possible by § 1 (1) AStG old version can only relate
to those amounts that are caused by an interest rate that is not in line with
the arm's length principle and is too low, as a result of the above-mentioned
relevance to treaty law; a correction is therefore ruled out to the extent of
the write-downs to the going-concern value. 26 3.
26 3 However, under the circumstances of the
dispute, the latter does not necessarily have to remain the case:
The opening of the second instance gives the
tax court the opportunity, on the one hand, to investigate the question of
whether the loans issued by I-GmbH can be understood as such at all and, in
this context, can be regarded as seriously meant; at first glance, one may well
have doubts about this according to the findings made by the court so far
regarding the precarious economic situation of H-Inc. at the time the loans
were granted. Should this doubt prove to be true, the provision of the
"loan" proceeds would have to be qualified as (hidden) contributions
of I-GmbH to H-Inc. from the outset, which would at the same time raise doubts
about a partial value depreciation identical to the period (see e.g. BFH ruling
of 7 May 2014 X R 19/11, BFH/NV 2014, 1736). If the answer is in the negative,
there is another opportunity to examine whether the write-downs to the
going-concern value made by I-GmbH in accordance with section 6(1) no. 2
sentence 2 EStG 2002 are supported by the actual
circumstances. This is (also) connected with whether a group reserve initially
existed when the loan was issued, but such a reserve would have ceased to exist
later - at the time of the write-offs.