Organschaft

Definition and legal basis:

The fiscal unity is a tax construct that allows several legally independent companies to be combined into a single tax entity. It is used for corporation tax, trade tax and VAT. The legal basis can be found in the German Corporation Tax Act (KStG), the German Trade Tax Act (GewStG) and the German Value Added Tax Act (UStG).

The aim of the consolidated tax group is to reflect the economic unity of a group for tax purposes and to avoid disadvantages that could arise from the legal independence of the individual group companies.

Types of tax group:

There are three main forms of tax group:

1. income tax group (Sections 14-19 KStG, Section 2 (2) GewStG):
– aggregation for the purposes of corporation and trade tax
– results of the controlled companies are attributed to the controlling company

2. VAT group (Section 2 (2) no. 2 UStG):
– Treatment as one company for VAT purposes
– Intercompany sales are not taxable

3. income tax group (no longer exists):
– was abolished in 2003

Requirements for a consolidated tax group for income tax purposes:

The following requirements must be met for a consolidated tax group to be recognized for income tax purposes:

1. financial integration:
– majority of voting rights of the controlling company in the controlled company

2. economic integration:
– close economic ties between the controlling company and the controlled company

3. organizational integration:
– control of the controlled company by the controlling company

4. profit transfer agreement:
– obligation to transfer the entire profit for at least five years
– must be entered in the commercial register

5. domestic management:
– Both the controlling company and the controlled company must have their management in Germany

Legal consequences and tax implications:

The fiscal unity has far-reaching tax consequences:

1. profit allocation:
– profits and losses of the controlled company are allocated to the controlling company

2. loss offsetting:
– Immediate offsetting of losses within the tax group

3. trade tax:
– Summary of trade tax assessment amounts
– Possible optimization through different assessment rates

4. sales tax (in the case of a VAT group):
– internal sales are not taxable
– only the controlling company submits sales tax returns

Advantages and disadvantages of the tax group:

Advantages:
1. immediate offsetting of losses within the tax group
2. liquidity advantages by avoiding capital gains tax on profit distributions
3. simplification of VAT (no invoicing for internal sales)
4. opportunities for tax optimization, e.g. for trade tax

Disadvantages:
1. Complexity and high administrative effort
2. Liability risks for the controlling company
3. Long-term commitment due to the profit transfer agreement
4. Possible disadvantages in the utilization of losses after termination of the tax group

Special features and current developments:

1 Cross-border tax group:
– Discussions on admissibility in the EU context
– ECJ case law on freedom of establishment

2. tax group and transformations:
– Special regulations for transformations within the tax group

3. reform discussions:
– Considerations on the modernization and simplification of tax group law
– Possible introduction of group taxation based on the international model

4. digitalization:
– effects on organizational integration and management

Practical significance for companies:

The tax group is an important instrument in group tax planning:

– Enables efficient tax structures in corporate groups
– Requires careful planning and ongoing monitoring
– Relevance for company acquisitions and disposals (due diligence)
– Significance for group financing and cash management

Companies must carefully weigh up the advantages and disadvantages and regularly review the efficiency of the tax group.

International perspective:

In an international comparison, German tax group law is relatively complex. Many other countries have more flexible group taxation systems. The EU Commission has presented proposals for a common consolidated corporate tax base (CCCTB), which contains elements of Europe-wide group taxation.

In summary, the consolidated tax group is an important but complex instrument of group management in Germany. It offers considerable advantages in terms of loss offsetting and tax optimization, but also requires careful planning and implementation. In view of the ongoing internationalization and digitalization of the economy, it is to be expected that tax group law will be further developed in the future and possibly made more flexible in order to meet the requirements of modern corporate structures.