A topsy-turvy world: The healing of an income tax group threatened with failure is generally regarded as desirable. Not so in the judgement published by the Federal Fiscal Court on 13 July 2023 (case reference I R 7/20). In this judgement, the BFH confirmed that a profit transfer agreement (GAV) was not cured as desired and that the tax group had failed.
The aim was to achieve the "pass-through" of proportionate trade tax assessment amounts from subordinate partnerships of the controlled company to the controlling company after the case law had changed.
This could only succeed if a provision on curing was not applicable. The curing of a CLA had been introduced due to the extension of section 304 AktG by a paragraph 4. In the past, many profit transfer agreements with a GmbH had not made comprehensive reference to the provision of the German Stock Corporation Act when transferring losses. In order to avoid a failure of the fiscal unity, the legislator allowed an otherwise failed fiscal unity to be cured if the CLA had been effectively amended by the end of 2014 or the fiscal unity had been terminated by then anyway. In the case in dispute, the CBA was cancelled at the end of 2012.
The court surprisingly found that the curative effect depends on the taxpayer's behaviour and is at the taxpayer's discretion in the relevant case constellation. If the taxpayer does not want a cure and does not change a CLA, the cure effect does not materialise. In the case in dispute, the desired trade tax result was achieved after all.
Dr Wolfgang Walter is a lawyer, tax consultant and tax law specialist at TAXGATE, a law firm specialising in transactions, investments and tax compliance, and comments on the tax group regulations in the Bott/Walter KStG commentary published by Stollfuß-Verlag.
