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According to the German Supreme Tax Court in its ruling of 27 February 2019, published on 15 May 2019, and contrary to its previous case law, Article 9 (1) of the OECD Model Tax Convention, does not prohibit an income adjustment under domestic transfer pricing rules, where the write-off of an unsecured group loan is not recognised as a deduction from taxable profits.

The decision has a significant impact on the financing of foreign subsidiaries by domestic shareholders. In a number of other cases, the Supreme Tax Court will shortly be giving concrete form to its new principles.