Jurisdiction understands the concept of division of operations as the factual and personal connection between two companies which are independent in themselves. However, while the holding company is only being created, the operating company already exists when the operation is split up. He is regularly a GmbH or UG, which carries out the operational business. The ownership company usually has only an asset management function.
1st Broad lines of division of operations
The division of operations is not regulated by the Income Tax Act. Rather, it is a so-called legal institute, which the Bundesfinanzhof had already developed in 1971 (BFH, judgment of 08.11.1971, GrS 2/71).
An operating split occurs when there is a material and a human connection between two companies. The following conditions shall apply:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.