The profit transfer agreement as a condition of the income tax organization

The profit transfer agreement for the income tax coverage of an organization is the subject of the contribution published below. This is about both the historical roots and development of the profit transfer agreement and the importance for organizations today. In particular, the controversial aspect of the freedom of establishment under European law is taken into account. On this basis, we are discussing group taxation as an alternative taxation procedure. On the one hand, the legislator could resolve European law shortcomings in the taxation of bodies, but at the same time create a basis for an entrepreneur-friendly body law.

Benefits of Organising

use at the GmbH

A. Introduction

The taxation of corporations is based on the tax subject principle. Each company has to invest its income separately from its shareholder. The income-tax organization breaks through this tax-subject principle and enables group-internal loss offsetting[1]. Since 1933, the income tax organization requires the conclusion of a profit transfer agreement[2]. By concluding it, an entity undertakes to transfer all its profits to a controlling entity. Even after the codification of the organization in the Corporate Tax Act 1969[3] and the corporate tax reforms 2000[4] and 2008[5], the organization continues to link to the profit transfer agreement.

The past and present changes in the economic, political and legal framework are increasingly forcing the Federal Government to make adjustments to the legal institution of the organization. For example, developments in European tax law resulted in the elimination of the double national reference of § 14 para. 1 sentence 1 KStG[6] and the obligation to recognise final losses of EU foreign subsidiary companies[7]. Increasing formal requirements in share and tax law for the profit transfer agreement have led to criticism of its requirement in the literature since 1995[8]. With the reversal of BilMoG in 2009, trade and tax balance sheets are increasingly divided, so that there are now no reasons to continue to make tax offsetting dependent on commercial profit transfer[9].

Other countries, such as Austria, have already reacted to the formal, business and European legal criticism and enable their groups of companies to consolidate tax without concluding a profit transfer agreement[10]. This puts the German economy at a location and competitive disadvantage if the profit transfer agreement is to be maintained[11]. For the current legislative period, the coalition agreement between the CDU/CSU and the FDP[12] therefore provides for examining the introduction of a modern group taxation[13].

B. Entity with profit transfer agreement

I. Basics

By introducing the profit transfer agreement pursuant to § 291 para. 1 AktG as a prerequisite of the corporate tax organization, the violation of the tax subject principle is justified by the constitutional principle of economic performance. The attribution of tax profits or Losses of the organ company to the organ carrier constitutes in addition to the transfer of profits determined under commercial law also the compensation of losses determined under commercial law according to § 302 para. 1 AktG ahead. In this way, it is to be ensured that the organ carrier taxes only profits, i.e. offsets losses that he actually receives or bears. [] 14]

During the organization, all profits are transferred to the ruling company. The profit transfer agreement guarantees gem. § 304 AktG for minority shareholders adequate compensation for the loss of dividends. In addition, the profit transfer agreement must be signed by the minority shareholder acc. Article 305 of the AktG provides for the possibility of exchanging its shares for shares in the ruling company or of receiving a cash compensation. Furthermore, the profit transfer agreement ensures the protection of creditors. [] 15)

II. Profit transfer agreement as a condition of the organisation

1.) SE, AG and KGaA as organ companies

The corporate tax organization with an SE, AG or KGaA as an organ company sets a m. § 14 Abs. 1 KStG, in addition to a qualified organ carrier, a qualified organ company[16] and financial integration, also precedes the conclusion of a profit transfer agreement. This requires according to § 293 Abs. 3 AktG of the written form and according to § 293 Abs. 1 AktG of the approval of the general meeting with a qualified majority of 3⁄4 of the votes.

If the profit transfer agreement is entered in the commercial register by the management board of the organ company in accordance with § 294 AktG before the end of the marketing year, it is effective for the tax attribution of profits in accordance with § 14 para. 1 sentence 1 KStG to the beginning of the marketing year, if the organ company has been financially integrated into the organ carrier since the beginning of the marketing year[17]. For the recognition of the profit transfer agreement for the organization, the conclusion according to § 14 para. 1 No. 3 sentence 1 KStG for at least five years condition[18]. In addition, the profit transfer agreement must be effective under civil law and must be effectively implemented throughout its duration[19].

According to § 296 AktG, the profit transfer agreement cannot be terminated retroactively, but can only be cancelled taking into account the agreed notice period[20]. In terms of tax law, the cancellation of the profit transfer agreement during the marketing year pursuant to § 14 Abs. 1 No. 3 sentence 3 KStG to the beginning of the marketing year. If the period during which the profit transfer agreement was executed is less than five years, this in principle leads to the so-called “disastered body”[21] and the profit transfer agreement is considered ex tunc not executed[22]. The retroactive elimination of the legal consequences of the organization qualifies profit transfers as hidden profit distributions and loss compensation payments as hidden deposits[23]. This does not apply if an important reason for termination i. S. d. § 14 Abs. 1 sentence 1 no. 3 KStG and the occurrence of this reason was not yet known at the conclusion of the contract[24]. Important reasons exist, for example, if one of the parties is unable to meet its payment obligations or the organ company is liquidated[25]. In certain cases, a conversion of the organ carrier or the organ company also leads to the dissolution of the profit transfer agreement without causing the organ company to suffer accidents[26]. The sale of the organ company, on the other hand, represents only an important reason in accordance with § 14 para. 1 sentence 1 no. 3 KStG, if the profit transfer agreement allows for a termination for this case[27].

2. Capital companies other than organ companies

According to § 14 KStG, only the income of an SE, AG and KGaA can be attributed to the organ carrier. It is only through § 17 KStG that other corporations, in particular limited liability companies, become able to become organ companies. This requires the conclusion of a contract corresponding to the profit transfer agreement, the regulations on the maximum transfer amount and the minimum loss assumption acc. §§ 301 and 302 AktG includes[28]. By supreme court jurisprudence, the requirements for joint stock companies were transferred to organ companies in accordance with § 17 KStG, so that the profit transfer also requires a 3⁄4 majority of the shareholders and the written form[29].

Originally, § 17 KStG only covered limited liability companies. Since the entry into force of the SEStEG in 2006, the concept of a limited liability company also includes companies under foreign law. However, since they cannot relocate their statutory seat to Germany, it was for them due to the double national reference of § 17 para. 1 sentence 1 KStG the corresponding application of §§ 14 to 16 KStG remained denied. With a BMF letter[31], the Federal Ministry of Finance responded to the EU infringement proceedings against Germany and refrained from the double national link insofar as EU/EEA capital companies can enter the control unit with a body carrier if they move their administrative headquarters to Germany and the other requirements of §§ 14 ff. KStG for the recognition of a tax body are fulfilled[32].

3. Special features of the business tax organisation

Unlike the corporate tax authorities, the trade tax authorities did not require a profit transfer agreement until the 2002 tax period[33]. Within the framework of the Corporate Tax Development Act[34], the requirements for an organisation in corporate tax law and business tax law have been harmonised and the profit transfer agreement has since also been a prerequisite for an organisation in business tax law[35]. According to § 2 Abs. However, the organ company is regarded as the permanent establishment of the organ carrier and is assessed accordingly by the competent tax office and the corresponding municipality.

III. Intermediate result

The profit transfer agreement at SE, AG and KGaA is a mandatory prerequisite for the income tax organization. It is subject to requirements under company law and tax law, the legal consequences of which ex tunc are eliminated if they are erroneously designed or implemented and thus lead to additional tax burdens. For other corporations as defined in § 17 KStG, similarly strict regulations apply with the same legal consequences.

In this chapter, the author presents the formal requirements of the profit transfer agreement, examines whether the commercial profit transfer and loss assumption as justification for the tax offsetting of profits comply with the performance principle and goes into more detail about the significance of the profit transfer agreement in other legal systems. Furthermore, the profit transfer agreement is analysed in the light of the freedom of establishment.

II. Formal requirements

1. Basic principles

For the tax recognition of the profit transfer agreement, share and tax requirements must be met when it is concluded and implemented. If this does not succeed, the legal consequences of §§ 14 to 16 KStG retroactively lapse[37]. The profit transfers would be ex tunc as hidden profit distributions, i.e. the loss compensation payments are classified as hidden deposits and thus trigger an unintended tax burden[38]. This chapter shows that these requirements are sometimes difficult to meet, make tax offsetting unsuitable and in many cases are characterised by practical hurdles and legal uncertainty.

2. Equity law

a General Meeting Resolution

The approval requirement of the general meeting according to § 293 para. 1 AktG of the organ company and according to § 293 Abs. 2 AktG of the organ carrier – if this is an SE, AG or KGaA – to the profit transfer agreement regularly leads to a temporal organization gap if the ordinary general meeting of the current calendar year has already taken place. An extraordinary general meeting would be followed by an additional administrative and financial effort. Moreover, any further resolution of the General Meeting offers an additional point of attack for “predatory shareholders”. [39]

b Trade Registry Entry

§ 14 Abs. 1 sentence 2 KStG presupposes the civil validity of the profit transfer agreement and thus also binds according to § 294 para. 2 AktG to the entry of the profit transfer agreement in the commercial register. The reason for the connection between commercial register registration and tax offsetting is not recognizable. A delay in the registration – for example due to longer processing times at the end of the year – can lead to the profit transfer agreement only becoming effective under civil law in the following year and thus creating a tax gap in the profit statement. [] 40]

c Outside shareholders

The profit transfer agreement acc. § 304 Abs. 1 AktG of an appropriate compensation agreement for minority shareholders[41]. While under civil law both a fixed and a variable compensation payment does not affect the effectiveness of the profit transfer agreement, the profit transfer agreement is only recognized for income tax if the organ company acc. § 14 Abs. 1 sentence 1 KStG pays all its profit to its organ carrier[42]. In the event that the compensation payment is based on the profit of the organ company in percentage terms, the entire profit cannot be transferred and therefore the organ company is not recognised for tax purposes[43]. In the case of combination models of variable and fixed compensation payments, BFH[44] considers that in any event there is no transfer of the entire profit if the outside shareholder is not placed differently by the profit transfer agreement than if he had retained the dividend subscription right[45]. The tax administration has responded to this judgment with a non-application decree[46] and also notes that the minimum compensation of § 304 para. 2 sentence 1 AktG (variable) compensation payments are valid under civil law and thus do not preclude the proper implementation of the profit transfer agreement. In any case, the proper implementation of the profit transfer agreement is made more difficult if minority shareholders are involved in the organ company.

d) Maximum amount of disposal

Other formal problems involve the calculation and the range of the evacuation maximum amount. Uncertain was the validity of the profit transfer agreements, which reflected the provision of § 301 sentence 1 AktG in its old version before BilMoG and did not contain a dynamic reference to the provision. However, the Federal Ministry of Finance has found in a BMF letter[48] that existing profit transfer agreements are not necessarily to be adjusted. For GmbH groups, the Federal Ministry of Finance also makes it clear that there is no obligation to include a clause corresponding to § 301 sentence 1 AktG in the profit transfer agreement. It is sufficient if the maximum amount specified in § 301 sentence 1 AktG is not exceeded when the profit is transferred[49]. However, it would also have been desirable to clarify other doubts regarding the maximum distribution amount[50]. The following example:[51] An organ company realizes a result of ./.40 before activation of its intangible assets. After activation of their intangible assets (value: 100), a profit in the sense of 60 results. According to § 301 AktG, the profit may not be transferred as of 60. However, it is unclear whether the interaction of §§ 301 sentence 1 and 302 para. 1 AktG a loss compensation obligation exists as of 40.

3. Tax law

a) Minimum contract term

b Loss assumption agreement

Capital companies other than organ companies in accordance with § 17 KStG must in principle agree on a “assumption of losses in accordance with the provisions of § 302 of the German Stock Corporation Act”. Although § 302 AktG applies equally in the GmbH Group, such an agreement is therefore basically not necessary[60]. According to supreme court jurisprudence[61], however, § 17 sentence 2 no. 2 KStG still applies, so that the profit transfer agreement must contain a loss assumption agreement[62]. In practice, the following wording was often used: ‘The OT-GmbH undertakes, in accordance with § 302 AktG, to compensate any annual deficit incurred by OG-GmbH during the duration of the contract, insofar as this is not compensated by taking amounts from the free retained earnings that have been entered into it during the duration of the contract’[63]. In the same wording, OFD Rheinland considered that there was no effective loss-absorption agreement since only the first paragraph of § 302 AktG is reproduced. OFD Rheinland does not agree with the above-mentioned clause with BFH judgments[65], according to which the profit transfer agreement must either refer generally to § 302 AktG or must reproduce every paragraph of § 302 AktG literally[66]. The non-recognition of the formulation customary in practice by the senior financial directorate led to considerable legal uncertainty and many bodies threatened to crash[67]. Recently, the BFH[68] ruled in favour of the taxpayer that the above-mentioned clause – despite the reproduction of only the first paragraph – refers in its entirety to § 302 AktG and thus meets the requirements of § 17 sentence 2 no. 2 KStG[69].

c) Excess and reductions

The increasing disintegration of commercial law and tax law results, especially since the introduction of the BilMoG, finally leads to problems in practice[70]: The difference between the transfer of profits under commercial law and the allocation of profits under tax law leads to over- or under-transfer[71]. If the reasons for the more or less removal are in pre-organic time, the removal difference is in accordance with § 14 para. 3 KStG for profit distributions or deposits. If the causes are in organic time, according to § 14 para. 4 KStG in the tax balance sheet to form active or passive offsets in order to ensure correct taxation in the event of a sale of the organ shareholding[72]. The large number of possible sub-items, the different lifespans and the problems with the continuation of each individual item make the implementation in practice so difficult and in some cases even impossible[73].

III. Business problems

If, with good corporate management, the profit is to be transferred to the parent company and is not available for investment from the organ company, entrepreneurial misincentives can arise[74]. At the same time, there is a lack of incentives for management to avoid potential losses if these are offset by the parent company for at least five years[75].

Furthermore, the profit transfer agreement removes the liability shielding effect of the subsidiary[76]. Although the parent company should bear the losses of the organ company economically in order to offset them, unlimited liability for a minimum period of five years cannot be proportionate[77].

It is also important that public limited companies are obliged under § 58 AktG to distribute 50% of their annual profit to their shareholders. The entry of more than half of the annual profit into the profit reserve requires acc. § 58 Abs. 3 AktG of the approval of the general meeting. If the group parent company has concluded profit transfer agreements with its subsidiaries, this means that the profits of the organ companies must be “passed through” to the shareholders[78]. The entire group of companies would thus be decisively dependent on the resolution of the Annual General Meeting for liquidity and investment planning[79]. In addition, losses of the organ companies have a direct impact on the annual profit of the group parent company and thus reduce the distribution volume or make a distribution even impossible[80].

IV. Lack of reasons for linking commercial profit transfer and tax offsetting

The profit transfer agreement is intended to ensure that, on the one hand, the organ carrier can pay the tax liability arising from the organ income through the profit paid[81]. On the other hand, according to the principle of economic efficiency, the organ carrier should only be able to offset losses which he has borne economically[82].

The link between commercial law and tax law profit determination[83] is questionable. In recent years, the discrepancy between the two profit determination methods has increased increasingly. Due to the elimination of the reverse relevance in the context of the introduction of the BilMoG, the different recognition and measurement rules are applied partly independently of each other[84] and now lead to different results[85]. For example, the commercial approach of a threatening loss provision may lead to a loss compensation obligation on the part of the organ carrier while a profit is allocated for tax purposes[86]. The formation of a reserve according to § 6b Abs. 3 EStG in tax law, on the other hand, leads to a tax reduction[87]. This can result – in the case of simultaneous commercial profit transfer – in a tax loss allocation[88].

V. European legal aspects

1. Basic principles

The organization brings many advantages for the group of companies. Equally extensive are the conditions that must be met: The organ carrier must be an unlimited taxpayer in accordance with § 14 para. 1 sentence 1 no. 2 KStG or a domestic branch of a foreign commercial enterprise i. S. d. § 18 KStG. According to the current legal wording of § 14 para. 1 sentence 1 KStG are also, in addition to an organ company with management and headquarters in Germany, the financial integration and a profit transfer agreement according to § 291 para. 1 AktG is required.

2. Freedom of establishment

Since individual criteria of the organization can only be met by German companies, the organization is effectively limited to German groups of companies. It is questionable whether this restriction to national territory conflicts with the freedom of establishment under Article 49 TFEU. In order to protect the freedom of establishment, the ECJ has stated that without a sufficient justification, investments by Germans in other EU countries may not be restricted[89]. A restriction is justified, for example, if the balanced distribution of tax rights between the Member States is jeopardised, there is a risk that the losses in both Member States will be allowed to be deducted or losses will be deliberately transferred to high-tax countries and thus there is a risk of tax evasion[90]. The principle of proportionality must also be respected. This means that the restriction on the freedom of establishment is permitted only to the extent that it is necessary to attain the grounds for justification[91].

The condition of financial inclusion can also be met by cross-border groups of companies, so that there is no restriction on cross-border situations[92].

Due to the double national reference, only companies with management and headquarters in Germany were previously approved as organ companies. The exclusion of companies incorporated under foreign law from corporate taxation is considered by the EU Commission to be incompatible with the freedom of establishment[93]. The Federal Ministry of Finance responded to the EU infringement procedure with its letter of 9 February 2011[94] and refrained from this discriminatory condition insofar as domestic management is now sufficient. The fact that neither companies with only registered office in Germany nor companies without any tax connection in Germany are recognized as an organ company is still questionable under European law[95].

Similarly, the requirement of the profit transfer agreement for the organization according to h. M. in the literature is a (disguised) discrimination and is incompatible with the freedom of establishment[96]. The Corporate Tax Act stipulates in § 14 para. 1 sentences 1 and 2 a profit transfer agreement effective under civil law in accordance with § 291 para. 1 AktG ahead. The civil law validity is in accordance with § 294 Abs. 2 AktG only after registration in the commercial register of the registered office of the controlled company. Although a profit transfer agreement can also be concluded in other legal systems, such as Austria[97], it is not an effective profit transfer agreement as defined in § 291 para. 1 AktG, which has been entered in the competent commercial register. As a result, organ companies abroad de facto leave the organization taxation. The profit and loss transfer agreement is therefore – in addition to the domestic purchase of the organ company – a further hurdle for the cross-border organization and disadvantages European corporate groups compared to purely German corporate groups in the following areas[98]:

§ An advantage of the organization is that losses of the organization company are attributed to the organization carrier and can be offset against profits from other business areas. However, if it is a foreign subsidiary, the profit transfer agreement – and the required domestic reference of the subsidiary – avoids the organisation and thus the loss offsetting[99]. In the refusal of loss offsetting, the ECJ sees in the case of Marks & Spencer[100] a violation of the freedom of establishment. Such discrimination is justified only insofar as there is a risk of double loss, there is a risk of tax evasion or the balanced distribution of taxation powers between Member States can be violated[101]. In this context, a State may, in accordance with the principle of proportionality, limit the offsetting of losses only to the extent deemed necessary to achieve the abovementioned objectives[102]. As a result, so-called “final losses”[103] are to be recognised at the parent company[104]. European law always takes precedence over national tax law. Therefore, the fact that the profit transfer agreement is in accordance with § 291 para. 1 AktG cannot be effectively concluded with the foreign subsidiary, the loss offsetting does not in principle prevent[105].

§ Since 2004, profit distributions according to § 8b para. 5 KStG flat-rate 5 % as non-deductible operating expenses. This applies equally to profit distributions of domestic and foreign subsidiaries. In the domestic case, this “chest fine” is avoided by an organ according to § 15 no. 3 sentence 1 KStG. Because a cross-border body is not possible, this five-percent taxation restricts the freedom of establishment without any justification being apparent. [106]

§ With the interest barrier introduced in 2008 (§ 4h EStG, § 8a KStG) the deduction of interest expenses has been limited. Since the organ company and the organ carrier are considered to be an undertaking for the purposes of the interest barrier (§ 15 No. 3 sentence 1 KStG), the interest deduction restriction applies to them on the basis of the so-called “stand-alone clausel”. 4h para 2 sentence 1 letter b EStG. If the profit transfer agreement cannot be effectively concluded cross-border and thus the justification of the body is refused, this leads to a worse position of foreign investment, because the international group cannot be considered as a company for the purposes of the interest rate barrier. A general interest as justification for the restriction is not apparent here either.[107]

§ From the trade tax addition of the financing expenses as well as the rent and rent interest acc. § 8 No. 1 letters a and b GewStG is waived if the service is provided within an organ circle[108]. In the case of financing or rental services of the foreign subsidiary for group affiliated domestic companies, the trade tax add-on cannot be avoided. As regards the addition of rent and rent interest, the ECJ has already ruled in the Eurowings case[109] that for the restriction of the freedom to provide services the art. 56 There are no grounds for justification in the TFEU[110]. Therefore, nothing else can apply to financing expenses[111].

3.) Consequences for the profit transfer agreement

Since no ruling has yet been issued on the German body with regard to fundamental freedoms, there is legal uncertainty as to how the profit transfer agreement should be replaced[112]. The literature mainly discusses three views on the consequences for the profit transfer agreement:

The complete waiver of the conclusion and implementation of the profit and loss transfer agreement is a possibility, but leads to the omission of the central precondition of the organisation[113]. It cannot therefore be an adequate alternative to disregard profit transfer and loss compensation, which are constitutive for the organization[114]. This is also the view of the Finanzgerichte Niedersache[115] and Rheinland-Pfalz[116]. In two similar cases, they decided that a German corporate parent company could offset any final losses incurred by its EU subsidiary in principle within the framework of a cross-border body. However, the conclusion of a profit transfer agreement could not be waived without replacement, but it required an obligation to assume losses under debt law concluded in advance. Taking into account the principle of economic performance, a (guaranteed) obligation to assume losses between organ carrier and foreign organ company seems to be a plausible possibility for the time being[117]. In doing so, the controlling company undertakes to pay any annual deficit incurred by the controlled company during the duration of the contract in accordance with § 302 Abs. 1 AktG. However, since this is a one-sided loss compensation obligation and not, as in the case of the profit transfer agreement, a mutual agreement in which profits are also to be transferred, this would lead to discrimination against the parent company and is therefore problematic[118].

Accordingly, a contractual agreement between the organ carrier and the organ company that complies with the provisions of §§ 291 ff. AktG is the best option. For this purpose, it requires in particular the obligations for full profit transfer and loss compensation pursuant to § 302 AktG[119]. The lack of the possibility of having the profit transfer agreement entered in the commercial register at the registered office of the organ company in accordance with § 294 AktG cannot prevent its effectiveness. This is already made clear by the fact that incoming EU/EEA companies – which are now also authorised as organ companies[120] – cannot be required to register the profit transfer agreement in the foreign commercial register[121]. Whether the determination of the loss to be compensated must be made under German or foreign commercial law, however, is unclear[122].[123]

As a result, there is no doubt that the statutory provisions on the condition of the profit transfer agreement are contrary to European law. However, the legal uncertainty as to how the profit transfer agreement can be effectively replaced creates problems in practice to create a cross-border body.

The uniform taxation of a group of companies is also possible in other jurisdictions. Within the European Union, these include Denmark, Finland, France, Great Britain, Ireland, Italy, Latvia, Luxembourg, Malta, Netherlands, Austria, Portugal, Sweden, Spain and Cyprus. Outside the European Union, for example, group taxation is possible in Japan and the United States of America.[124]

In the past, the profit transfer agreement was not unusual in other jurisdictions as a prerequisite for group taxation. Similar to the German organization, the former Austrian group taxation was linked to the profit transfer agreement[125]. However, the parent company’s liability for losses or the acquisition of the profits of the subsidiary caused business problems and led to a decentralisation of profit responsibility[126]. In addition, the minority shareholder was demoted by the dividend-eligible to the interest recipient for purely tax reasons[127]. In the context of the 2005 tax reform, Austrian group taxation was completely redesigned[128] and the above-mentioned business problems were taken into account by the profit transfer agreement insofar as the profit transfer agreement as a condition of group taxation was abolished[129].

As the world’s penultimate state, Slovenia distanced itself from the profit transfer agreement[130]. Until the abolition of group taxation there on 01.01.2007, this was a prerequisite for offsetting earnings[131]. A current look across the German border makes it clear that in international comparison only in Germany the profit transfer agreement is a prerequisite for group taxation.

VII. Intermediate result

The linkage of the income tax organization to the profit transfer agreement is obsolete and no longer appropriate[133]. This is already legitimised by the lack of correlation between commercial and tax income statements and the resulting lack of purpose[134]. There is no longer any justification for linking the two accounting principles[135].

The described continuous legal uncertainty, the high demands on the form and the business disadvantages of the profit transfer agreement clearly speak for its abolition. In addition, it is not compatible with the freedom of establishment and already requires reform or abandonment from the point of view of European law[136]. In an international comparison, it was presented that the group taxation systems of other countries are not linked to a profit transfer agreement. have already stopped the connection due to system weaknesses. The question arises as to why the profit transfer agreement must continue to be linked in Germany, while “all other EU/EEA member states do not need this bulwark”[137].

In the context of the reform of group taxation, the h. M. pronounces itself in the literature on the basis of the reasons set out above for a separation of the income tax organs from the profit transfer agreement established under company law.

Conclusion

The current organizational law is essentially based on jurisprudence from 1933. Since then, the requirement of a profit transfer agreement has not been abandoned, so that the current body, in addition to excessive formal requirements, also has violations of the freedom of establishment. These can be remedied with a fundamental change in the legal situation and a distance from the profit transfer agreement. At the same time, the demands of industry for a simplified right of organizing can be followed with fewer risks. Modern group taxation would make Germany more attractive again as a location for corporate groups, import taxable income into Germany and create additional jobs. If the European law shortcomings of the body are not remedied, the new group taxation threatens to become the subject of an EU infringement procedure.