For a long time, the regulations on organizing have been criticized and a fundamental reform called for. Due to a lack of budgetary resources, this cannot be implemented for the time being. In the course of the “Law for the Amendment and Simplification of Corporate Taxation and the Tax Travel Expense Law” (GÄuVdUR), which came into force on 26.02.2013, only specific changes were made. Although the changes do not represent major changes as required, the “regulations on the tax organization (..) have been simplified and adapted to current case law”. After all, one of the key points of this “small body reform” is the mitigated requirements for the implementation of the profit transfer agreement, the implementation of European law requirements, and the introduction of a separate and uniform determination procedure.

The individual legislative changes have been divided into three thematic areas, each of which is dealt with in individual subsections. Thus, under the section “Changes in relation to the profit transfer agreement” the error-prone profit transfer agreement is discussed, for which, in the course of the reform, the legally fictitious guarantee of correctness was created. In the meantime, the increased requirements for loss assumption agreements within the meaning of § 17 no. 2 KStG will be taken into account. With regard to international regulations, the contribution deals in particular with the adaptation to European law regarding the requirements of organ carriers and organ companies. Finally, the last subsection looks at the new assessment procedure.

First of all, we refer to the rule that according to § 14 (1) sentence 1, § 17 sentence 1 KStG can only be a corporation organ company. Organgesellschaft AG, SE, KGaA and GmbH are therefore considered. In addition, the organ company must have its management (§ 10 AO) in Germany and its registered office (§ 11 AO) in a Member State of the EU or in an EEA state (so-called simple domestic ties).

2.2. Organ carrier of an organ body

First of all, it should be noted that according to § 14 (1) sentence 1 KStG, a commercial undertaking must be the organ carrier. Thus, a commercial enterprise exists if the conditions of § 2 paragraph 1 GewStG (R 2.1 paragraph 1 GewStR, H 2. 1. paragraph 1 GewSt) are fulfilled.

According to § 14 (1) sentence 1 no. 2 KStG, a natural person (with commercial activity) or a corporation, association of persons or assets not exempt from corporate tax may be considered as organ carrier. Also a partnership within the meaning of § 15 (1) sentence 1 no. 2 EStG can be organ carrier if it carries out an original commercial activity according to § 14 (1) no. 2 sentence 3 KStG. However, commercial embossing and commercial infection are not sufficient to be able to fulfil the function of organ carrier.

Furthermore, it is necessary that the participation in the organs is assigned to a domestic permanent establishment (§ 12 AO) for the entire duration of the organs, § 14 (1) no. 2 sentence 4 KStG. In this regard, one can only assume a domestic permanent establishment if, according to § 14 (1) no. 2 sentence 7 KStG, the income attributable to this permanent establishment is subject to domestic taxation, both under national law and under a double taxation agreement (DTA). This is intended to ensure taxation in Germany, since the “permanent establishment concept” of § 12 AO may differ from that of individual DTAs. However, a domestic residence/habitual residence or a domestic establishment is not necessary.

2.3. Financial inclusion within an institution

In order for an organization to exist, other factual requirements must be met in addition to the personal requirements.

Of great importance for the existence of a organ carrier “is the existence of a superior/subordinate relationship between a organ carrier” and the organ company. According to § 14 (1) sentence 1 no. 1 KStG, the subordinate, dependent organ company must be financially integrated into a controlling company. In this context, financial inclusion occurs when the institution bears a majority of the voting rights (more than 50 %) from shares in the organ company. Only shares which are attributable to the organ bearer under tax law, in accordance with economic ownership within the meaning of § 39 AO, are taken into account here, see R 57 sentence 1 KStR.

In addition to direct participations, according to § 14 (1) sentence 1 no. 2 KStG, indirect participations are also to be taken into account if the body owner has a majority of the voting rights in each intermediate company. According to the third sentence of R 57 KStR, direct and indirect (or several indirect holdings) may also be combined in order to achieve financial integration as a result. On the other hand, in the case of a partnership, it must be noted that the participation in the organ company must be allocated to the total assets, R 58 sentence 4 KStR, since holding the shares in the special assets of the individual shareholders is not sufficient.

In addition, the financial integration of the organ company into the company of organ carriers pursuant to § 14 (1) no. 1 KStG must be continuous from the beginning of its marketing year until the end of the marketing year, see R 59 (1) sentence 1 KStR.

2.4. Profit and loss transfer agreement / Profit and loss transfer agreement

2.4.1. The profit transfer agreement as a prerequisite for organising

As a further prerequisite for an organization, § 14 (1) sentence 1 KStG requires that a civilly effective profit transfer agreement be concluded between the organization and the organization company in accordance with § 291 (1) AktG and that this “subsequently also actually be carried out”. In practice, the profit transfer agreement (short: GAV) is also referred to as the profit transfer agreement (short: EAV). In addition to offsetting profits, the contract also covers the opposite case, namely offsetting any losses. For this reason, the term profit or loss transfer agreement is the more precise of the two. In this respect, it should be noted that this scheme also applies if the organ company is a SE, AG or KGaA. In the case of a capital company other than an organ company within the meaning of § 17 KStG (GmbH), the provisions of § 17 sentence 2 no. 1 and no. 2 KStG apply to the profit transfer agreement.

2.4.2. What is a profit transfer agreement?

The profit transfer agreement is a company contract whereby an organ company undertakes to transfer all profits to another company (organ carrier). In return, there is a loss compensation obligation for the other contractual partner according to § 302 paragraph 1 AktG. Thus, the organ company carries out its activities on behalf of the organ carrier.

2.4.3. Resolution of a profit transfer agreement with the organisation

If an AG or KGaA is an organ company, the profit transfer agreement will only be effective if a majority vote (minimum 75%) has been passed at the Annual General Meeting of that organ company. And if the body owner is also a company to which the AktG applies, here too, according to § 293 paragraph 2 AktG, a 75% majority vote of the general meeting must be present in order for the contract to take effect. According to § 293 (3) AktG, the profit transfer agreement must be in written form within the meaning of 126 BGB. Nevertheless, the profit transfer agreement only becomes effective once it has been effectively entered in the commercial register, § 294 (2) AktG, R 60 (1) sentence 2 KStR. For this purpose, the attribution of income to the organ carrier according to § 14 (1) sentence 2 KStG must be carried out for the first time for the calendar year in which the marketing year of the organ company ends in which the profit transfer agreement takes effect.

2.4.4. Minimum time requirement for contract duration

2.4.5. Tax effect on the institution only if the contract is actually implemented

In terms of tax law, the organization is only recognized when the profit transfer agreement has not only been effectively concluded, but has actually been executed. For this purpose, according to § 14 (1) sentence 1 KStG, the “whole profit” of the organ company must be paid.

The GmbHG does not contain §§ 291 ff. AktG comparable standards. Nevertheless, the BFH has made it possible by judgment of 24.10.1988 that a profit transfer agreement can apply to a GmbH if it agrees in the company contract in particular the application of the provisions of company law. § 17 sentence 1 KStG stipulates that §§ 14 to 16 KStG shall be applied accordingly to the GmbH if the maximum amount of profit transfer specified in § 301 AktG is not exceeded as a further condition within the meaning of § 17 sentence 2 no. 1 and no. 2 KStG, as well as a loss assumption is agreed by a reference to § 302 AktG in the respective valid version.