The Supreme Tax Court has followed its previous case law in holding that a company financed by subordinated shareholder loans may not take up a liability until the conditions for repayment are met. However, the subordination is a shareholder’s capital contribution to be taken to capital reserve rather than income to the extent the debt had value as an asset at the time.
The Supreme Tax Court has ruled that qualified subordinated debt is not a liability if it is only repayable out of future profits or in case of a possible liquidation surplus.
