BFH: market-development grant to foreign affiliate capitalised over 15 years

A market-development grant (Markterschließungszuschuss) paid to a foreign related company withstands the arm's-length test and is business-motivated (betrieblich veranlasst) under § 4 Abs. 4 EStG where it is paid to earn higher licence incomeBundesfinanzhof — so no withdrawalBundesfinanzhof (Entnahme) under § 4 Abs. 1 Satz 2 EStGBundesfinanzhof, and no income correction under § 1 AStGBundesfinanzhof. The IV. Senat so decided in twin judgments of 20 May 2026Bundesfinanzhof: IV R 4/26 (2004) and IV R 37/23 (2005 to 2008, plus trade-tax measurement amounts 2004 to 2008)Bundesfinanzhof, settling the tax treatment of a grant a German brand-owning partnership paid to its French central company. The expenditure is capitalised as acquisition cost of a goodwill-like intangible (Markterschließungsrecht)Bundesfinanzhof and depreciated over 15 yearsBundesfinanzhof.

The grant was multi-causal, and that saved it. The agreement recited competition-law-driven restructuring and rehabilitation of two loss-making French distributors — but it also committed the recipient to expand distribution, prove profitability against planned turnover, inject equity into the distributors, and continue the French business for 15 years, with pro-rata repayment of the grant on early shutdown. The Finanzgericht Mecklenburg-Vorpommern had treated rehabilitation as overlaying market development and denied both business motivation and arm's-length character, pointing to missing direct business relations, missing collateral, and the distributors' chronic deficits. The Bundesfinanzhof reversedBundesfinanzhof: a merely indirect contractual chain does not negate business motivationBundesfinanzhof; an unsecured grant needs no collateral since there is no repayment claim to secure; and the profitability calculation, projecting discounted licence fees above the grant, documented a genuine licence interest.

On transfer pricing, the same arm's-length principles govern the withdrawal/business-expense distinction and § 1 Abs. 1 AStG (before the 2008 insertion of § 1 Abs. 3 AStG) — at least as a starting point. The German partnership was the group's Strategieträgerin: worldwide trademark owner licensing each country's central company for variable turnover-based royalties, profiting directly from every euro earned abroad. Where brand development and sales growth in a market is the goal, the brand owner bears the market-development cost; low-risk distributors need not share it. The court saw no conflict with the finance ministry's transfer-pricing circulars or the OECD guidelines on allocating such costs.

Capitalisation follows. The grant bought a MarkterschließungsrechtBundesfinanzhof: the secured legal position of a 15-year continuation of the French business, backed by repayment claims — an economically exploitable, transferable advantage with standalone value to a hypothetical acquirer. A paid acquisition under § 5 Abs. 2 EStG exists even where the transaction first creates the asset, and the 15-year contractual guarantee period sets the useful lifeBundesfinanzhof (with pro-rata depreciation in the year of addition under § 7 Abs. 1 Satz 4 EStG). Group licensors funding foreign market development should structure grants with forward-looking continuation duties, profitability proof and repayment clauses — and capitalise, not immediately deduct, the outlayBundesfinanzhof.

Legal basis: EStG § 4 Abs. 1 Satz 2, Abs. 4, § 5 Abs. 2, § 6 Abs. 1 Nr. 1, § 7 Abs. 1; AStG § 1 Abs. 1; BFH judgments of 20 May 2026, IV R 4/26 and IV R 37/23.