Clarification for taxable entities

Based on recent rulings made by the German fiscal court, uncertainty has arisen as to what are the exact requirements for organizational integration. Organizational integration is, along with financial and economic integration, a condition for the existence of a taxable entity.

These uncertainties have been removed by a recent letter from the Federal Ministry of Finance (BMF).: In cases where the management of the parent company is the same as that of the subsidiary, organizational integration is granted. The same applies if the subsidiary company has entered into a control agreement or the subsidiary company is incorporated in the parent company. In all other cases, a careful analysis of the degree of interdependence between the parent company and controlled company or the intervention possibilities on the basis of BMF must be considered. Neither the financial obligation associated with the right of shareholders to issue instructions nor a contractual obligation to regularly report on the management is sufficient grounds for an organizational integration.

The new guidelines are valid from 01 January 2013. However, until 01 January 2014, the tax authorities will not object to taxpayers using the 31 December 2012 legal regulations.

Source: Letter of the Federal Ministry of Finance dated 07 March 2013 (IV D 2 – S 7105/11/1001)


Michael Siebel, Partner, Auditor, Tax Advisor

Tags: tax advice

By Michael Siebel, Partner, Auditor, Tax Advisor, published 2013-05-01

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