EU/EEA company managed from Germany can be Organschaft subsidiary

In response to an infringement proceeding of the European Commission, the finance ministry has decreed that EU/EEA registered companies with their place of management in Germany are entitled to join an Organschaft as subsidiaries.

Under the Corporation Tax Act as it stands, an Organschaft subsidiary must be a German registered company with its place of management in Germany. Companies formed and registered in other EU/EEA member states are thus excluded, even if they are tax-resident in Germany by virtue of their place of management. The European Commission sees this as a restriction on a company's freedom of establishment and has initiated infringement proceedings under the EU Treaties. The finance ministry has now reacted with a decree with immediate effect allowing a company registered in another member state, but managed from Germany, to join a German Organschaft as a subsidiary in respect of its entire domestically taxable income. The other conditions for joining an Organschaft, including the conclusion of a legally valid profit pooling agreement, must, of course, be observed.

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