CJEU – Recent Developments in Direct Taxation 2022

1. Facts and legal Background of the Case

X GmbH & Co. KG is a limited partnership established in Bremen (Germany). It holds shares in several German companies and provides advisory and management services to these companies. X GmbH & Co. KG’s unlimited partner is a corporation resident in Germany. X GmbH & Co. KG’s (only) limited partner is a private limited company (“B.V.”) resident in the Netherlands. The B.V. is wholly owned by Y N.V., a public limited company also resident in the Netherlands. As a result, Y N.V. indirectly owns 100% of the interest in X GmbH & Co. KG.

X GmbH & Co. KG and Y N.V. entered into an agreement, according to which Y N.V. obliged itself to provide advisory and management services to the subsidiaries of X GmbH & Co. KG. Both parties agreed that the remuneration for these services should be based on the actual costs incurred. Y N.V. was entitled to charge back direct and indirect costs. However, shareholder costs were to be borne by Y N.V. According to the agreement, Y N.V. was obliged to prepare a detailed documentation of the recoverable costs.

In the years 2007-2010, Y N.V. charged X GmbH & Co. KG almost EUR 6 million for the services provided to the sub...