VwGH: Benefits granted to shareholders

May 12, 2021 Benn-Ibler Rechtsanwälte

In spring 2009, a limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) sold its shareholding in a company for a purchase price of EUR 473,181.80. Of this amount, EUR 20,000 was paid to the selling limited liability company, the remaining EUR 453,181.80 was received by its sole shareholder. The GmbH recognised only the amount of EUR 20,000 as proceeds from the sale in the annual financial statements for 2009.

By way of a decision, the tax office (FA) increased the profit of the GmbH, qualified the payment of EUR 453,181.80 as a hidden distribution to the sole shareholder and held the GmbH liable for the capital gains tax due on this hidden distribution.

An appeal was filed against this decision regarding the imposition of capital gains tax on the grounds that there was no hidden distribution, but rather a repayment of contributions, since the sole shareholder had made a shareholder contribution of EUR 100,000.

The Federal Fiscal Court (Bundesfinanzgericht, BFG) partially upheld this appeal. In the court's opinion, the GmbH had the option of reinterpreting distributions to the sole shareholder as repayments of contributions. However, a prerequisite for this was a positive deposit balance on the deposit record account of the sole shareholder. This was the case here, so that the distribution could be reinterpreted as a repayment of deposits, limited to the amount of the deposits on the record account. The remaining amount was a hidden distribution.

The FA appealed against this ruling. The Supreme Administrative Court (Verwaltungsgerichtshof, VwGH) stated that the payment of EUR 453,181.80 to the sole shareholder met all the requirements for a hidden distribution. Although there is a right to choose to treat benefits as a return of contributions, this option ends when the tax liability arises, i.e. at the latest at the end of the financial year in question. The law does not provide for a subsequent reinterpretation as a return of contributions.

The GmbH had not made use of this option by the end of 2009. The BFG's ruling was therefore to be overturned due to unlawfulness.

VwGH Ro 2019/13/0027-4