The term “sister societies” is a metaphor for companies that stand next to each other like siblings. The background is the joint participation of the same partner. If, for example, a holding GmbH is involved in two operating GmbHs or UGs, these companies are referred to as sister companies. The holding company is the “parent company”.
Principle 1: Significant participation in both sister companies
The background of the sister company is comparatively easy to understand. It is important to know, however, that the Bundesfinanzhof (BFH) only accepts sister companies if the respective shareholder is significantly involved in the respective companies. A significant participation within the meaning of tax law exists if it constitutes such a participation within the meaning of § 17 EStG. This is always the case if the shareholder has held at least 1 % of the share capital or share capital within the last five years (R 17(2), first sentence of the EStR).
Example 1: M-GmbH acts as a holding company. It participates in the share capital of T1-GmbH, which amounts to EUR 100,000, with EUR 500.00. In the T2-GmbH, share capital EUR 25,000, it holds 100%. In addition, M-GmbH invests in a listed company (AG), in which it holds a 0.0001% stake.
There are no sister companies, because M-GmbH is only involved in one company in the sense of tax law. In T1-GmbH it holds only 0.5% of the shares, in the AG even only 0.0001%.
Example 2: M-GmbH is 100% involved in T2-GmbH. It has expanded its investments in start-ups and subsidiaries, so that it now holds a 5% stake in T3-GmbH.
T2 and T3 are sister companies. Shares in their share capital are largely held by a single shareholder, M-GmbH. It thus acts as the parent company of both companies.
2. tax impact of contracts between sister companies
The sister company has no tax significance insofar as it acts in isolation from the other companies in the group. Special features apply, however, if the parent undertaking acts as organ carrier. The same applies to contracts and transactions between companies or between companies and parent companies. On the one hand, there is the risk of a hidden profit distribution (vGA), on the other hand, there can be an operating split.
So let’s take a look at some peculiarities that have to be considered in sister companies in this regard!
2.1. hidden distribution of profits (vGA)
In the case of sister companies, there may be a hidden distribution of profits within the meaning of § 8 (3) sentence 2 KStG in several constellations:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.