With the judgment of September 28, 2022, the BFH decided that under certain conditions an incongruent distribution of profits can be tax-recognized even without a corresponding provision in the articles of association.
In practice, profit distributions do not always occur based on the shareholding ratios. Tax law offers the possibility of recognizing such incongruent profit distributions. However, according to the Ministry of Finance, this is only possible if a corresponding regulation is legally anchored in the articles of association, explains the law firm MTR Legal Rechtsanwälte, which has a focus on tax law advice.
Contrary to this view of the tax authorities, the Federal Fiscal Court went a step further with a ruling on September 28, 2022, and decided that an incongruent distribution of profits can also be tax-recognized if the shareholders’ meeting unanimously adopts a resolution that punctually breaks the articles of association, and this resolution cannot be contested by any shareholder (File number: VIII R 20/20).
In the underlying case, the plaintiff held a 50 percent stake in a GmbH during the years in dispute from 2012 to 2015. The other 50 percent were held by another GmbH, whose sole shareholder was the plaintiff. The articles of association of the first GmbH did not provide for rules on profit distribution. Accordingly, they were to be distributed according to the shareholding ratios. However, the shareholders unanimously decided during the years in dispute that pre-distributions would only be paid to the second GmbH.
The tax office considered these distribution resolutions for the incongruent distribution of pre-distributions to be null and subjected half of the distribution amounts to taxation as income from concealed profit distributions for the plaintiff.
The plaintiff successfully contested this. The BFH clarified that the unanimously adopted distribution resolutions should be considered civilly effective decisions on the use and distribution of profits for taxation. Accordingly, there were only open profit distributions to the second GmbH and no distributions to the plaintiff. There was also no abuse of tax arrangements. The plaintiff did not gain any unauthorized advantage by law through the distributions solely to the GmbH. The incongruent distributions, effectively resolved under civil law, are to be tax-recognized, according to the BFH.
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