Tax & Legal

German corporate group law is characterized by the principle of the legal independence of group companies. Nevertheless, the question repeatedly arises as to what extent the parent company is liable for tortious breaches of duty by its subsidiaries. This question has significant practical implications for corporate group organization and risk management. The following article provides an overview of the corporate law foundations, the grounds for the parent company’s liability, and its limitations.

A provision for contingent liabilities (for payments in arrears) must be recorded in the tax accounts for the employer's obligation to grant paid time off (two days per year of service) which is available to employees who are at least 60 years old and have been with the company for at least ten years. With its decision the Supreme Tax Court contradicts the previous view of the tax administration.

According to Section 6(1) no. 3 Income Tax Act, non-interest-bearing liabilities with terms of at least 12 months, which do not constitute a deposit or advance payment, are to be discounted, i.e. a fictitious interest component (interest rate 5.5%) is initially deducted from profits and added back to profits in subsequent years as notional interest over the term of the loan.