The consolidated tax group for corporation and trade tax purposes is one of the most common and proven structures in corporate tax law for decades. The most important advantages of this recognised legal institution are the offsetting of profits and losses in the same period in small groups of companies and in groups of companies with the effect of conserving liquidity, the non-taxation of dividends and profit distributions from subsidiaries and the avoidance of trade tax add-backs and the interest barrier problem in the tax group. The tax group is also considered to be conducive to innovation if it is used from the outset for start-ups with high start-up losses. However, the complexity of the tax group is considerably increased by the fact that a profit and loss transfer agreement is required under group law. Special care must also be taken with compensation payments to minority shareholders.
The slightest structuring error can lead to the retroactive failure of the tax group over several years and to considerable back tax payments, especially as the case law of the Federal Fiscal Court follows a very formalistic approach and an increasingly fiscally-minded tax administration has a particularly critical eye on this. The most recent example of this is the attempts to reject the tax group as a notifiable tax structure in the case of cross-border relationships, although this has also been known and recognised for decades.
TAXGATE partner Dr Wolfgang Walter has been writing the commentary on the tax group regulations in the commentary formerly published by ARTHUR ANDERSEN and later by ERNST & YOUNG since 1993. From the outset, he placed particular emphasis on presenting the complex interrelationships between tax and group law so that the tax law-oriented user can immediately recognise the problem areas of group law. This then innovative approach to tax law commentary later became standard. Together with the equally long-standing co-author MinR Harald Bott, who comments on the area of taxation of the public sector and non-profit organisations, he has now taken over the editorship of the standard commentary on the German Corporation Tax Act, which is widely cited by the fiscal courts, the Federal Fiscal Court and academia and is widely used in tax structuring practice, with an emphasis on advisory services, the citation of which is now "Bott/Walter, KStG Kommentar".
