A hidden profit distribution does not reduce the income of a corporation according to § 8 Abs. 3 KStG. The hidden profit distribution is to be added off-balance sheet in the amount of its common value to the income of the corporation – in particular in the case of the GmbH and the entrepreneurial company (limited liability).
1. Hidden profit distribution
A hidden profit distribution is according to § 8 Abs. 3 KStG
a decrease in wealth or a prevented increase in wealth,
which is caused by the corporate relationship,
affects the income of the GmbH and
is not based on a profit distribution resolution that complies with company law.
A hidden profit distribution is primarily defined by special case groups that have repeatedly dealt with the tax courts and the BFH:
- inappropriately high remuneration of the managing director,
- interest-free or exceptionally low-interest loan,
- Excessive interest rate for loans to GmbH,
- unusual pricing in transactions between GmbH and shareholders,
- unusual design when renting items,
- Waiver of the GmbH on rights vis-à-vis shareholders.
Particularly tragic is the hidden profit distribution to a controlling shareholder-managing director or a close relative as a result of a lack of written agreement between shareholder and GmbH.
2. Legal persons and hidden profit distribution
A hidden profit distribution within the meaning of Section 8 (3) KStG can only exist for the following legal entities :
- Corporations and cooperatives,
- Mutual insurance associations,
- Real communities and associations,
- Businesses of a commercial nature of legal persons under public law.
A hidden profit distribution always presupposes that there is a membership or at least membership-like relationship between the company or corporation and the recipient of the hidden profit distribution, which gives the recipient the necessary influence over the corporation. In the case of a GmbH or an entrepreneurial company (limited liability) , this is the participation of the shareholder who mediates the corresponding rights in the shareholders’ meeting of the GmbH.