Prior to February 26, 2013, a PLPA was to include a provision for loss absorption, in accordance with section 302 of the Shares Act. In accordance with the amended rules applicable from that date, the PLPA must include a loss absorption provision, which specifically refers to the current version of Section 302, as amended from time to time. Documentation (local file and root file) should not be put in place at the time of the transaction or as part of a tax return, but should be provided only on request during a tax audit. However.B, in the case of exceptional business transactions (e.g., restructuring, cost-sharing, other important long-term agreements), documents must be prepared within six months of the end of the fiscal year in which the transaction took place (but again, it should only be provided on request as part of a tax audit). According to the previous opinion of the Federal Ministry of Finance (BMF) in its decision of October 15, 2007 (IV B 7 – S 2770/0), a violation of the obligation to pay interest on a claim would not have affected the existence of the tax group. In the event of non-payment of interest or non-receivable waiver, the parties would have breached only an ancillary contractual obligation. When a parent company holds more than 50% of the voting rights in a subsidiary established in Germany, these two companies can enter into a formal profit and loss pool (PLPA) contract, which must be concluded for a period of at least five years. If certain conditions are met, the resulting relationship is called an organ. The annual results of an organ are actually grouped at the parent level. The subsidiary of the tax group itself is subject to only 20/17 of the compensation paid to external minority shareholders, if any.
Profits and losses within a group can therefore be offset, but there is no provision for the elimination of intra-group profits across the entire taxable base. It should also be noted that negative income collected by the parent company or subsidiary within an organization is excluded from compensation in the same year or another year if a foreign country takes this into account for the taxation of a member of the organization or other organization. In the end, any right to damages should now be levied in order to avoid a faulty balance sheet and to ensure the uninterrupted existence of the tax group. For clarity, the obligation to pay interest on the loss claim should be set out in writing in a new profit and loss transfer agreement. The consolidated group`s regime in Germany is based on a legal concept and has tax, legal and accounting consequences.