How to claim lost profits as a claim for damages
Damaging events can lead to a considerable loss of profit and can become extremely threatening. Calculating and claiming lost profits is difficult, but is essential to secure the future of the company. Overview of essential facts.
Overwhelming burden of proof on the part of the injured party
The term lost profit comes from the law on damages and describes all financial advantages that the injured party would have received if the damaging event had not occurred. Since the injurious job opportunities are thwarted, the lost profit is part of the damage to be replaced and thus part of the claim for damages.
If, for example, there is a traffic accident and an entrepreneur is financially damaged beyond the damage event due to inability to work, there is a right to compensation. The lost profit is intended to compensate for the disadvantage (hypothetical profit) that the injured party incurred. The basis is § 252 BGB:
The loss is deemed to have escaped the profit that could probably be expected based on the normal course of events or the special circumstances, particularly the institutions and arrangements taken.
Calculation of lost profit
Calculating lost profits is a challenge that should not be underestimated. The fact that the property benefits at the time of the damage was not part of the property of a victim makes it difficult to prove the likelihood of doing business in practice. Experts will estimate the amount of lost profits. The experts at specialize in business interruption damage and explain on their website how lost profits are calculated.
According to the explanation, the actual development of profits is compared with the hypothetical development as part of the damage calculation. The injured party has to prove which individual sales have been lost due to the damage. The damage is then the difference between these lost sales and the associated costs, explains the explanation of the variant of the concrete calculation. If there is insufficient basis for an assessment of the damage, there is a high probability that the lawsuit will be dismissed. It is all the more important that the decision between concrete and abstract calculation is made carefully.
Overall view of the development or evidence of loss-related orders / transactions
In order to explain the normal course of events according to the German Civil Code and to estimate the lost gross proceeds, the average operating results of the past three years can be calculated before the loss event. Reference periods from the time after the loss event can also serve to illustrate the hypothetical course. The more comparable the relevant periods, the more precisely the lost profit can be determined. Seasonal influences and growth trends must also be taken into account, added the Morongo ski experts. The other option is to show missed orders in concrete terms. Because abstract estimates and concrete calculations are mutually exclusive, the options mentioned must not be mixed. A clear distinction must be made here between concrete and abstract calculation.
Cost savings and damage reduction costs
Costs such as salaries, taxes or material costs are deducted from the lost profit. All costs that are otherwise customary must be considered. In turn, costs that were accepted to contain the damage, so-called damage reduction costs, must be added. The injured party must also provide evidence here to clarify why these costs were necessary and how the damage could be minimized. Whether the action for damages is successful depends largely on whether the explanations regarding the calculation method and the numbers used are comprehensible and sufficiently substantiated.
Compensation granted as a replacement for lost or lost income is subject to income tax in accordance with Section 24 No. 1a Income Tax Act (EStG). In addition, corporation tax must be paid in accordance with Section 8 of the Corporation Tax Act (KStG). Taxation is reduced. If taxes are considered as a damage item, they are reimbursable with a permanent tax assessment after assessment. Since taxation with sales tax is only legal for income that has actually arisen, sales tax is irrelevant when calculating gross proceeds. When comparing sales and purchase prices, net prices must always be used.