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. Continue reading
Tax & Legal
The Supreme Tax Court has confirmed that the provision disallowing a debt write-off from a company in which the creditor holds or held over 25% of the shares is to be taken literally. Continue reading
The Supreme Tax Court has held that a difference between the agreed price for a bad debt package and its agreed market value is, in cases of doubt, an ancillary service to the main supply. Continue reading
The ECJ has held that the sale of currently due, but doubtful, debts at their agreed market value and without further recourse to, or obligations towards, the seller is a VAT-free sale of debts, rather than a taxable debt collection service.
An ECJ advocate general has suggested the purchase of a bad debt portfolio be seen as such and therefore as exempt from VAT. If, however, it is a debt collection service, the VAT basis is the difference between the purchase price and the subsequent collections.
The finance ministry has reacted to a Supreme Tax Court case allowing a write-down on a receivable from a domestic subsidiary with a decree to the effect that an unsecured loan to a foreign related party would not generally be at arm's length.
The Supreme Tax Court has held that irrecoverable proceeds from the tax-free sale of shares reduce the tax-free gain and are not a deductible bad debt.