Tax & Legal

In its ruling of 24 September 2024, the Brandenburg Higher Regional Court clarified that a managing director is in breach of his duty if he withdraws assets from the company for his own benefit and to the detriment of the company. The withdrawal of company assets without compensation by the managing director, who was also a shareholder, also constituted an existence-threatening intervention and led to liability under Section 826 of the German Civil Code (BGB).

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.

We have been noticing an increased number of notifications to the Federal Central Tax Office during tax audits for the failure by German subsidiaries and permanent establishments to declare and pay over German Insurance Premium tax on premiums paid by a foreign group entity to an insurer domiciled outside the EU or EEA. This can prove very costly.

The Supreme Tax Court has held that an acquirer of a business may appeal against the otherwise final tax obligations of the seller for which he has become liable through the takeover.