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EU Commission Attacks German Rules for Fiscal Unity


On 30 September 2010 the EU Commission issued an official request to Germany to change its rules concerning the German fiscal unity (tax group) as the current legislation is considered to be incompatible with the current freedom of establishment. Taxand Germany outlines the effect of the German fiscal unity to multinationals with subsidiaries in Germany.

Currently, companies set up in Germany in accordance with the company law of another EU Member State do not benefit from a fiscal unity under the German tax regime. This is highly relevant for the growing number of companies with a place of effective management in Germany and statutory seat in another Member State. Though they are subject to unlimited tax liability in Germany, they cannot become a subsidiary in a fiscal unity which would enable such companies to off-set their income / losses for German tax purposes with the taxable income / losses of the other members within the fiscal unity.

Taxand's Take

The formal request marks the second stage of the infringement proceeding. If, within two months Germany fails to provide a satisfactory response, the Commission may refer Germany to the EU's Court of Justice. This could mean a potential change to tax liability for multinationals if Germany agrees to amend their current rule.

Your Taxand contact for further queries is:
Arianne Jerey-Hener
T. +49 6196 592 24810

Taxand's Take Author