From 2022, a partnership can be taxed like a corporation (KöMoG of 30 June 2021, Federal Law Gazette I 2021, 2050). There are various pitfalls along the way.
Although obvious, the amendment to the law, which was passed in a knee-jerk reaction, left completely unregulated whether the partnership, which is only fictitious as a corporation for tax purposes, can be included in a tax consolidation group as a controlled company for income tax purposes in order to offset the profits and losses of various companies. The first voices from the tax authorities reject this.
However, the tax group regulations should not conflict with this, as the wording has long been understood by the Federal Fiscal Court from the context of tax law. A corporation according to tax law therefore does not have to be a corporation in the sense of civil law.
The problem lies more in civil law. However, it is also recognised there that a partnership can conclude a profit and loss transfer agreement as an obligated company. It is only when it comes to the entry of this agreement in the commercial register, which is generally regarded as a prerequisite for its effectiveness, that a conflict arises: in the case of a partnership, company agreements are not considered by case law to be capable of being entered in the commercial register. On the other hand, the provision of the AktG on the registration requirement only applies to corporations. It is derived from this that a profit transfer agreement with a partnership can become legally effective without a commercial register. This would then close the circle to the tax law requirements of the tax group.
Even if, according to the current legal opinion, it should be possible to organise a tax group with a partnership opting for corporation tax, the various issues must be kept in mind. As resistance from the tax authorities is to be expected, a tax group should not be at the forefront of the structuring objectives when opting for corporation tax.
Dr Wolfgang Walter is a lawyer, tax consultant and specialist lawyer for tax law at TAXGATE, a law firm specialising in transactions, investments and tax compliance, and comments on the provisions of the German Corporation Tax Act (KStG) in the Bott/Walter commentary published by Stollfuß-Verlag.
