Global

Details

  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 2/1/2013

Germany - New dual-consolidated loss rules could affect financing arrangements 

February 1:   Germany’s existing dual-consolidated loss rules currently disallow the losses of a parent of a German tax group (Organschaft) when that company deducts the same loss in a foreign tax grouping system. Moreover, in practice, the rules are interpreted as applying only when the company is a dual resident.

Proposed change

Under proposals in the Germany’s draft annual tax law for 2013, the dual-consolidated loss rules would be broadened to apply to any situation when the loss of an Organschaft parent or subsidiary is deducted in a foreign jurisdiction (whether by that company or any other person, and whether or not in the context of a foreign tax grouping).


At present, the disallowance affects only the calculation of the Organschaft profit—it would continue not to apply to disallow an expense if the relevant company has its own taxable profit against which to offset the expense for German tax purposes.


This change could affect financing arrangements commonly used in Germany—for example when the top entity of the Organschaft is a German partnership and the interest on borrowings by the foreign partner is deductible both in Germany and in the foreign partner’s residence country. Other arrangements may also be affected.


The new rules would apply with retroactive effect to all open tax years.


See TaxNewsFlash-Europe: Germany - Dual-consolidated loss changes could affect financing arrangements


See also TaxNewsFlash-Europe: Germany - Pending tax changes could affect multinationals’ German investments




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