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Need to amend existing profit-and-loss transfer agreements under revised section 302 AktG

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Dr Gottfried Breuninger

Partner, German Head of Tax

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Dr Michael Ehret

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Dr Magnus Müller

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Habermayr Christina
Christina Habermayr

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Dr Dirk Schade

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Tim Spranger

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29 March 2021

By circular dated 24 March 2021, the German Federal Ministry of Finance granted a period at the latest until the end of 31 December 2021 for amending profit-and-loss transfer agreements concluded or modified prior to 27 February 2013.

Dynamic reference to the assumption of losses pursuant to section 302 of the German Stock Corporation Act (Aktiengesetz; AktG) now also mandatory for existing agreements

Effective as of 1 January 2021, section 302 AktG has been amended to the effect that a reference to the "restructuring plan" newly introduced in the German Act on the Stabilisation and Restructuring Framework (Gesetz über den Stabilisierungs- und Restrukturierungsrahmen; StaRUG) was included in section 302 (3) sentence 2 AktG. As a result, profit-and-loss transfer agreements which currently do not contain a dynamic reference to section 302 AktG must be amended to ensure that existing tax groups for (corporate) income tax purposes will continue to be recognised in future (for assessment periods 2021 onwards).

The requirement to include a dynamic reference to the obligation to assume losses pursuant to section 302 AktG in a profit-and-loss transfer agreement specifically applies to tax groups for corporate income tax and trade tax purposes with corporates other than in the legal form of a stock corporation under German law (Aktiengesellschaft), a European stock corporation (Societas Europaea) or a German partnership limited by shares (Kommanditgesellschaft auf Aktien). The dynamic reference to section 302 AktG is therefore in particular required for profit-and-loss transfer agreements with a German limited liability company (Gesellschaft mit beschränker Haftung) as controlled company (Organgesellschaft). Pursuant to section 17 (1) sentence 2 no. 2 of the German Corporate Income Tax Act (Körperschaftsteuergesetz; KStG), an assumption of losses must be agreed in such profit-and-loss transfer agreements by including a specific reference to the provisions of section 302 AktG "as amended".

The requirement of a dynamic reference to section 302 AktG was introduced in 2013 and, taking effect on 26 February 2013, replaced the static reference to section 302 AktG which had previously been sufficient. Based on the application provision for section 17 (1) sentence 2 no. 2 KStG, however, profit-and-loss transfer agreements validly concluded or modified prior to 27 February 2013 (so-called Existing Agreements) were still to be recognised for tax group purposes even if they only contained a static reference to section 302 AktG in the version of article 9 of the act of 10 November 2006 (BGBl. I 2006, p. 2553) or cited its wording. As a result of the revision of section 302 AktG, these static references or the cited wording have become inaccurate. As the German Federal Supreme Tax Court (Bundesfinanzhof) in its ruling of 10 May 2017 (case no. I R 93/15, BStBl. II 2019, p. 278) rejected a previous equitable provision (Billigkeitsregelung) of the tax authorities when introducing section 302 (4) AktG, it is absolutely mandatory to amend Existing Agreements in order to ensure that existing tax groups for (corporate) income tax purposes will continue to be recognised in future (as of assessment period 2021) pursuant to section 17 KStG. The tax authorities have allowed a period until at the latest 31 December 2021 for implementing this amendment. To this end, the controlled company's resolution approving the amendment must be notarised and the amendment must be filed for registration with the commercial register. In these cases, amendments to the profit-and-loss transfer agreement for the purpose of including a dynamic reference to section 302 AktG do not constitute the conclusion of a new agreement; therefore, no new minimum term within the meaning of section 14 (1) sentence 1 no. 3 sentence 1 KStG is triggered and does not need to be agreed. Amendments are not required if the profit-and-loss transfer agreement ends before 1 January 2022.

In the light of the revision of section 302 AktG, profit-and-loss transfer agreements concluded or most recently modified prior to 27 February 2013 should be reviewed as to their validity and, if necessary, be amended by 31 December 2021, in order to generally achieve the recognition of the tax group for (corporate) income tax purposes for the assessment period 2021 and onwards. Our team of experts (please see the contact information given below) will be happy to provide you with an analysis in this context and assist you with implementing the necessary amendments.

1 minute read

Profit-and-loss transfer agreements with a German limited liability company as controlled company which were concluded or most recently modified prior to 27 February 2013 and which do not yet contain a dynamic reference to section 302 AktG "as amended" must be amended by including a dynamic reference to section 302 AktG at the latest until 31 December 2021 in order to ensure that existing tax groups will continue to be recognised for the assessment period 2021 and onwards.

Profit-and-loss transfer agreements can be amended until 31 December 2021 without any effect on the recognition of tax groups for assessment periods from 2021 and the already commenced minimum term within the meaning of section 14 (1) sentence 1 no. 3 sentence 1 KStG.

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