The Supreme Tax Court has held that declining rate interest on a loan should be taken to prepaid expense and then written off in equal portions over the term of the loan, unless the borrower had an early repayment facility without a claim for partial refund of the higher interest paid.
The Supreme Tax Court has held that an income adjustment for the interest lost on an interest-free loan to a foreign subsidiary can be made under the Foreign Tax Act unless the loan was granted as a substitute for share capital.
The Supreme Tax Court has held that the write-off of a shareholder loan held as a business asset is fully deductible by the income taxpaying holder even if the loan is to be seen as a substitute for share capital
The Supreme Tax Court has held that a refusal to recognise a related party loan write-off, does not preclude the tax office from treating the write-off of the accumulated interest as a further hidden distribution.
The Supreme Tax Court has held that the pre-2008 disallowance of loan interest on related-party finance for the purchase of shares refers to direct investments only.
A shareholder loan granted to an asset-managing partnership is not recognized from a tax point of view insofar as the company's loan liability is attributable to its shareholder for tax purposes (Section 39 (2) no. 2 of the German Fiscal Code). According to a recent decision of the Supreme Tax Court, the loan agreement neither leads to deductible income-related expenses for the borrower nor to income from capital assets for the lender but is rather considered a tax-neutral contribution. This would be different only in the case of commercially active partnerships.
A shareholder loan granted to an asset-managing partnership is not recognized from a tax point of view insofar as the company's loan liability is attributable to its shareholder for tax purposes (Section 39 (2) no. 2 of the German Fiscal Code). According to a recent decision of the Supreme Tax Court, the loan agreement neither leads to deductible income-related expenses for the borrower nor to income from capital assets for the lender but is rather considered a tax-neutral contribution. This would be different only in the case of commercially active partnerships.
The Supreme Tax Court has held that a handling fee charged on the grant of a publicly subsidised loan should be taken to immediate expense if not partially refundable on earlier loan repayment, or where earlier repayment is confined to instances of contract cancellation for good cause.
The Supreme Tax Court has refused a company a write-down to current market value of an interest-free long-term loan asset on the grounds that ultimate repayment was not in doubt and that the value impairment was therefore only temporary.
According to a ruling of the Supreme Tax Court, the compensation for use received in the context of the reversal of a consumer loan agreement after revocation is not subject to income tax.
The Supreme Tax Court has rejected a tax office income adjustment cancelling a write-down of an unsecured loan to a foreign subsidiary as the lack of security was, in the view of the tax office, not at arm’s length.
The Supreme Tax Court has held that a write-off of an irrecoverable related-party loan is not subject to income adjustment under the arm’s length rules, although the interest rate should reflect the bad debt risk.
In a recent judgement, the Supreme Tax Court (BFH) ruled that partial loan forgiveness for professional development training constitutes taxable income from employment under Section 19 (1) Sentence 1 No. 1 of the Income Tax Act.
According to a decision of the Supreme Tax Court, the mere fact that a foundation returns the amount it previously received from the donor to the latter within a short period of time as an interest-bearing loan and uses the interest income earned to promote its tax-privileged statutory purposes is not in itself a reason to deny the tax-deductibility of the contribution as donation.
In a request for a preliminary ruling from the District Court of Ravensburg (Landgericht Ravensburg) the European Court of Justice was asked for an interpretation of Directive 2014/17/EU on the creditor’s right to receive compensation for premature repayment of a loan. The ECJ held that it must be ensured that the calculation by the creditor of its loss of profit from the premature termination, considering the flat rate return on the sum repaid early is fair and objective, and that it does not exceed the creditor’s financial loss.
The Supreme Tax Court has held that the hedge costs on a foreign currency loan are to be deducted from the interest received in calculating the net foreign income as the basis for the foreign tax credit available.
The Supreme Tax Court has held that a foreign limited partner must accept attribution of the shares in a British distributor company held by the partners to the partnership. In consequence, the interest on a shareholder loan falls to the partnership, where it is requalified as trading income. The interest clause in the double tax treaty with the partner’s home country is inapplicable.
One of the issues of dispute before the tax courts was if the waiver of a claim by a shareholder of a corporation in return for a debtor warrant should be taken into account at the time of the waiver or later if it is certain that the condition subsequent will no longer occur. According to the decision of the Supreme Tax Court, the ensuing loss in the case from the waiver is to be considered for tax purposes already at the time of the waiver. This results in negative income from capital investments in the amount of the non-recoverable receivable. The Supreme Tax Court further revealed on how it sees qualified subordinated debt and interest for refinancing of the loan to be treated in the hands of a shareholding managing director.
In a recent judgment the Supreme Tax Court held that the granting of a loan at an interest rate which is not customary in the market is subject to gift tax as gratuitous contribution. When calculating the interest advantage the standard (typically used) interest rate of 5.5% as mentioned in Section 15 (1) of the Valuation Act cannot be applied if a lower market value for comparable loans has been established.
