Tax group - Subsequent adjustment of a profit transfer agreement
Apart from financial integration, a corporation tax group requires, in particular, that a profit transfer agreement is effectively concluded for a minimum period of at least five years. In practice, a question that repeatedly arises is: what are the consequences of a subsequent adjustment to the term of the agreement within the relevant five-year period?
The Berlin-Brandenburg tax court, in its ruling of 8.7.2025 (case reference: 8 K 8150/23) decided that the requirements under Section 14(1) sentence 1 no. 3 sentence 1 of the German Corporation Tax Act can also be satisfied if the term of a profit transfer agreement, which is effective under civil law, is postponed during the minimum term. The appeal is pending before the Federal Fiscal Court under the case reference I R 19/25.
In the case in question, there was insufficient financial integration at the commencement of the agreement. It was only later that the pre-requisites under company law were created. Subsequently, the parties to the agreement extended the term to ensure that the five-year minimum period would run from the date on which the tax group actually started. The tax court did not consider this adjustment to have had a harmful retroactive effect. The crucial factor is that the agreement has to have been effective under civil law from the outset and that there were no indications of an abusive structure within the meaning of Section 42 of the German Fiscal Code.
It is noteworthy that the tax court interpreted the minimum term in a functional way and focused on the purpose of the rule, namely, to ensure a sustainable allocation of income. The court rejected the formal view, according to which any subsequent change must necessarily be harmful. Nevertheless, there is still legal uncertainty in the light of the pending appeal proceedings.
