In a recent case, the Supreme Tax Court decided that the liability of a controlled company (subsidiary) in a tax consolidation group (“Organschaft”) for the tax liability of its controlling company (parent in the Organschaft) is not necessarily limited to such taxes which arose during the existence of the Organschaft. The controlled company may be liable to the extent that the parent is required to pay tax on the controlled company’s turnover and may deduct input tax amounts from invoices for services obtained by the controlled company.
The Supreme Tax Court decided that the portfolio dividends received by the controlled company within a tax group from domestic and foreign corporations via an investment fund are subject to trade tax in full. A deduction of foreign withholding taxes in accordance with Section 34c (2) of the German Income Tax Act is not possible when determining the trade income tax basis of the tax consolidation group (Organschaft).
In a recently published circular, the Federal Ministry of Finance (MoF) commented on the minimum running period of profit and loss pooling agreements (PLPA) and on partnerships acting as controlling entities. The current letter now supersedes the previous letter on these subjects of 10 November 2005 in its entirety.
In two judgments published in April 2025, the Supreme Tax Court decided that a corporation in which there is an atypical silent partnership can be a subsidiary within a corporation tax group. With its rulings, the court deviated from an earlier opinion of the tax authorities. The Federal Ministry of Finance has now commented on the consequences of the two judgments.
An untypical silent partnership in the controlled group company does not generally prevent the recognition of a consolidated tax group for corporation tax purposes. With this current decision, the Supreme Tax Court disagrees with the previous opinion of the tax authorities.
In two current judgments the Supreme Tax Court has commented on the German VAT Group requirements following preliminary rulings which the court had referred to the ECJ in 2109 and 2020 and on which the ECJ provided answers in its judgments of December 2022. In one decision the Supreme Tax Court changed its case law on financial Integration. In the second case, the Supreme Tax Court saw the need for yet another preliminary ruling from the ECJ regarding the VAT situation of intra-group transactions.
In a most recent judgment, the Supreme Tax Court held that the application for maintaining the book values in accordance with Section 3 (2) sentence 1 of the German Reorganization Tax Act can be made in the notarial deed on the reorganization of which the notary sends a certified copy to the responsible tax office in accordance with § 54 para. 1 of the Income Tax Implementation Ordinance.
In a case previously dealt with by the European Court of Justice the Supreme Tax Court saw the need for yet another preliminary ruling regarding the current German VAT situation of non-taxable intra-group transactions. In his Opinion the Advocate General takes the view that a VAT group’s internal transactions do not fall within the scope of value added tax.
The Federal Constitutional Court held that the retroactive introduction of Sec. 14 (3) Corporation Tax Act concerning the treatment of over-surrenders arising from periods prior to the membership in an Organschaft (tax consolidation group) to be in part unconstitutional and thus invalid.
The Supreme Tax Court decided that payments made by a provider of holiday lettings to the respective owners of the holiday homes in order to sublet them himself to travelers may qualify as rental within the meaning of Section 8 No. 1 letter a Trade Tax Act and must in part be added back to the trading profit subject to trade income tax.
At its meeting on 5 June 2024, the Federal Cabinet adopted a government draft for the
Finance Act 2024 (FA 2024). Despite numerous revisions, the material amendments from the original draft from 8 May 2024 have been limited. The main changes are shown in italics and red in the following summary of the government draft in italics and red.
On 17 May 2024, the Federal Ministry of Finance (MoF) sent a draft bill for the Finance Act 2024 (FA 2024) to the professional associations for comments by 24 May 2024. The draft has now also been published on the MoF website. The law is intended to implement changes to various areas of German tax law which need adjustment. The focus is on adjustments required by EU law and case law of the European Court of Justice (ECJ), the German Federal Constitutional Court, and the German Supreme Tax Court. Furthermore, follow-up amendments to previous legislative changes will be made. This blog summarises the key content. - Meanwhile the Federal Cabinet has approved the draft bill (see Update further below at the end of this post).
Services from so-called outplacement companies for individual support to permanent and indefinitely employed workers, in particular by means of so-called job application training, to help them find new employment relationships, qualify for an input VAT deduction. According to the Supreme Tax Court the entrepreneur is entitled to deduct input tax based on an overriding business interest while the employee's interest in the outplacement counseling is secondary.
The profit pooling agreement under the concept of a tax consolidation group (Organschaft) must be concluded for at least five years and be followed throughout its entire term. According to the decision of the Supreme Tax Court recognition of the Organschaft is to be denied with retroactive effect if preliminary annual financial statements of the controlled company can no longer be adjusted due to insolvency and if a different result would have been reported in the final annual financial statements if the accounting principles under commercial law had been applied correctly.
The Federal Cabinet today adopted the Common Action Plan against Organized Crime. It was jointly developed by the Federal Ministry of Finance, the Federal Ministry of the Interior, and the Federal Ministry of Justice and Consumer Protection.
According to the Supreme Tax Court, there is no retroactive right for input VAT deduction for a German company receiving services from other group companies who initially issued the invoices without VAT but later went to correct it. The correction of the invoice with retroactive effect requires that the original invoice already contains a VAT amount, which was not the case in the dispute before the court.
The Federal Ministry of Finance (MoF) has provided the Finance Committee of the Bundestag several formulation aids for its ongoing consultations on the Finance Bill 2022.
In a letter dated October 27, 2021, the German Federal Ministry of Finance sent a draft of the Corporate Income Tax Regulations 2022 (CITR) to the associations for comments.
