1. In the periods reviewed Bosch raised debt financing from the parent company BSH Hausgerate GmbH via the cash pooling system under two credit line agreements:
- w/o number dated 01.01.2013
- w/o number dated 13.08.2008
An analysis of bank statements showed that on days on which funds are received through the Credit Line w/o number dated 01.01.2013, Bosch transfers payments under contracts for the supply of household appliances No. L-005/2014 of 07.03.2014, No. L-007/2014 of 10.04.2014, No. L-009/2016 of 18.02.2016, No. L-006/2014 of 07.03.2014 and other agreements concluded with BSH Hausgerate GmbH amounting to more than 50% of the borrowed funds.
From 5% to 10% of annual receipts under the loan agreement w/o number dated 01.01.2013 were used to settle the loan under the agreement w/o number dated 13.08.2008 with BSH Hausgerate GmbH. Also on days on which funds were received through the Credit Line w/o number dated 01.01.2013, payments were made under other agreements with Group companies.
In this respect, on the day on which an amount is received under the loan agreement w/o number dated 01.01.2013, withdrawals may be made in settlement of the same loan in amounts exceeding the loan amounts received. In other words, effectively the borrowed funds were not used but were repaid on the same day (the date of borrowing), for example on 19.04.2016, 11.05.2016, 14.11.2017, 26.12.2017, 23.03.2018 and 20.06.2018, as is confirmed by bank statements.
2. An analysis of figures reflecting the use of funds showed that the greater part of funds borrowed through the Credit Line w/o number dated 01.01.2013 was used to make payments under supply agreements concluded with BSH Hausgerate GMBH (more than 50%) and by way of payments to other related companies
. In this respect, a part of funds received through the Credit Line w/o number dated 01.01.2013 was not used – the funds were repaid on the day on which they were received (from 23% to 38%).
3. The greater part of borrowed funds (over 70%)
received through the Credit Line w/o number dated 01.01.2013 was sent to Group companies
(under supply agreements, loan agreements and other agreements):
- in 2016 – 100%
- in 2017 – 85%
- in 2018 – 79.24%
4. Data contained in liquidity planners also confirm the conclusions that the greater part of borrowed funds (over 70%) was used not for investment activities (indicated as “Cashflow from investing activities” in the liquidity planner) but to make payments to Group companies (payments under contracts for the supply of household appliances, under loan agreements and under other agreements to BSH Hausgerate GMBH and other related companies)
5. The Inspectorate also examined credit line lending arrangements based on:
- Legal Entity Settlement Account Financing Agreement No. 002/0017L/14 dated 30.01.2014,
- Supplemental agreements to bank account agreements No. 682320RUR401153002 dated 15.04.2016, No. 40702810120010000673 dated 08.12.2017, No. 40702810200024566433 dated 30.01.2018, No. 40702810200024566433 dated 31.10.2018, concluded with Unicredit Bank JSC with all addenda,
- Credit agreements w/o number dated 01.01.2013 and dated 13.08.2008 concluded with BSH Hausgerate GmbH with all addenda,
- Ledgers for accounts 5101000, 5202000, 6600010, 6600080,
- Explanations provided by the taxpayer in Letter No. 17122020-1 dated 17.12.2020.
To analyse the sufficiency of funds in Bosch’s settlement accounts, the Inspectorate analysed balances in settlement accounts held with Unicredit Bank JSC as at the 25th
of each month (the date of settlements with BSH Hausgerate GMBH). According to the ledgers for accounts 51 and 52, the balances of the main settlement accounts as at the 25th
(or later dates where the 25th
falls on a non-working day) were at the minimum level under the agreements.
It follows from analysing the ledgers for accounts 51 and 52 and the taxpayer’s explanations regarding lending arrangements and from analysing Legal Entity Settlement Account Financing Agreement No. 002/0017L/14 dated 30.01.2014 and the supplemental agreements to the bank account agreement with Unicredit Bank that the arrangement enables the taxpayer to create a cash deficiency for the purpose of seeking borrowed funds
Thus, while having at the start of the day the minimum acceptable balance on its settlement account and balance of funds placed in deposit accounts with the bank, Bosch makes payments to suppliers without waiting to receive funds from its customers
, resulting in the formation of an overdraft which the bank automatically covers with funds from BSH Hausgerate GMBH’s account, thus giving rise to a loan payable.
6. This conclusion is further confirmed by the description of the cash pooling arrangement provided by the Taxpayer in Letter No. 17122020-1 dated 17.12.2020:“...at the start of each payment day Bosch has a balance on its main settlement account in an amount not less than the agreed minimum level (1 million roubles under the agreement w/o number dated 01.01.2013 and 0 under the agreement w/o number of 13.08.2008).During the day, settlements relating to Bosch’s business operations take place on the account: payments for supplies of goods and components, general business expenses, et al. On the basis of the trilateral cash pooling agreement, the bank makes those payments from Bosch’s account (even though there may not actually be enough funds in the account) since, by virtue of the trilateral agreement, the bank is certain that the deficiency of funds will, if necessary, be promptly compensated by BSH Hausgerate GmbH.Several times during the bank day (approximately at 10:30, 13:30, 15:45 and 18:00) the bank’s automatic system checks the amount of funds received up to the present time against the amount of funds transferred from the account. If a negative result arises (i.e., if expenditure exceeds receipts), the bank automatically transfers the shortfall from the master account of BSH Hausgerate GmbH (within the agreed limit) so that all Bosch’s expenditure is covered and a balance of 1 million roubles is shown in Bosch’s account”.
Thus, in the course of conducting the audit the Inspectorate fully examined the issue of Bosch’s need for borrowed funds based on both planned and actual balances in settlement accounts.