Existing contracts must be amended no later than December 31, 2019.
Parties to certain older German profit and loss transfer
agreements ("PLTA"), take note. According to the German
Federal Ministry of Finance's ("BMF") April 3, 2019,
circular letter, PLTA with controlled limited liability companies
("GmbH") must be amended by December 31, 2019, to ensure
that an existing income tax group will continue to be recognized in
the future.
Affected PLTA include those concluded before January 1, 2006, that
do not contain references to the statute of limitation provisions
of § 302 para. 4 of the German Stock Corporation Act
("AktG") of December 9, 2004. These references could
include wording such as, "The assumption of losses takes place
in accordance with § 302 para. 1–3 AktG," for
example.
According to the previous administrative opinion (BMF of December
16, 2005), this requirement did not apply to contracts concluded
before January 1, 2006. However, the German Federal Court of
Finance decided otherwise in its judgment of May 10, 2017 (DStR
2017, 2429). The BMF now follows this interpretation.
Existing contracts therefore must be amended no later than December
31, 2019, to include a dynamic reference to § 302 AktG in its
current version (§ 17 para. 1 sentence 2 no. 2 KStG). The
five-year minimum term for tax groups does not restart.
The amendment of the PLTA must be in writing and must be approved
by the shareholders of the controlling company and the parent
company. The shareholders' resolution of the GmbH must be
notarized and entered into its commercial register, so that
implementation can begin in a timely fashion.
For subsidiaries in the legal form of a stock corporation (i.e.,
AGs and not limited liability companies such as GmbHs), § 302
AktG already applies by law. The change in administrative practice
is therefore irrelevant for those entities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
