Hidden cash deposits with unclear origins do not automatically lead to an additional assessment of operating income. This was decided by the FG Münster in a judgment dated May 18, 2022 (Az.: 10 K 261/17 K, U).
If the taxation bases cannot be determined during a tax audit, it may lead to additional assessments by the tax authority. However, such additional assessments are not always lawful, explains the commercial law firm MTR Legal.
The Münster tax court also ruled that hidden cash deposits alone do not lead to additional assessments of operating income just because the origin of the funds at the shareholder cannot be clarified. A GmbH, which operated a wholesale business and made cash sales, appealed in the underlying case.
During a tax audit, the tax office found deficiencies in the recording of the open cash register. In addition, the sole shareholder had also made cash deposits into the register. According to his statements, the money came from loans personally granted to him and available private cash reserves. As a result of evaluating the private accounts of the sole shareholder and his wife, the tax audit conducted cash flow calculations and also considered the financing of private row houses. Overall, this led to significant discrepancies, which the tax office regarded as additional income of the GmbH and simultaneously as concealed profit distributions to the sole shareholder.
The lawsuit against this was partially successful. The 10th Senate of the FG Münster found that the cash flow calculations conducted at the shareholder did not justify additional assessments at the GmbH. A cash flow calculation is generally a suitable verification method. However, from unclear income of the shareholder, it cannot be concluded that the corporation achieved unrecorded operating income. Even if it is assumed that the unclear asset increases by the shareholder were achieved through business activities, it is equally possible that the shareholder achieved these revenues in the course of personal 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 asset increases does not allow for an adverse conclusion for the GmbH.
Therefore, an authority to estimate existed only due to improper cash register management. However, the results of the cash flow calculation should not be considered, decided the FG Münster.
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