Concealed cash contributions with unclear origin do not automatically lead to additional assessments of business income. This was decided by the FG Münster in a ruling dated May 18, 2022 (Ref.: 10 K 261/17 K, U).
If the taxation bases cannot be determined during an audit, the tax authority may make additional assessments. However, such assessments are not always lawful, explains the commercial law firm MTR Rechtsanwälte.
The Münster Fiscal Court also ruled that concealed cash contributions do not lead to additional assessments of business income solely because the source of funds from the shareholder is unclear. The plaintiff in the underlying case was a GmbH that operated a wholesale trade and also conducted cash sales.
During an audit, the tax office found record-keeping deficiencies in the management of the open cash register. Additionally, the sole shareholder had also made cash contributions to the register. According to his statements, the money came from loans granted to him personally and existing private cash reserves. The audit then carried out cash flow analyses using the private accounts of the sole shareholder and his wife, also considering the financing of private row houses. Overall, this resulted in high discrepancies, which the tax office considered as additional income for the GmbH and simultaneously as concealed profit distributions to the sole shareholder.
The lawsuit against this was partially successful. The 10th Senate of FG Münster established that the cash flow analyses conducted with the shareholder do not justify additional assessments for the GmbH. A cash flow analysis is generally a suitable verification method. However, it cannot be concluded from unclear income of the shareholder that the corporation has achieved unrecorded business income. Even assuming that the unclear increases in wealth were achieved by the shareholder through business activities, it is equally possible that the shareholder achieved these revenues through private transactions and not in the name of the GmbH, according to the court. The fact that the shareholder did not clarify the origin of his wealth increases does not allow for any adverse conclusion for the GmbH.
Therefore, an estimation authority existed only due to improper cash management. However, the results of the cash flow analysis are not to be considered, decided the FG Münster.
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