Consultancy costs in the case of the sale of a second-tier subsidiary
In group structures, a question that frequently arises is: for tax purposes, which company should take account of the consultancy fees related to a sale of shares?
The tax court (Finanzgericht, FG) in Düsseldorf, in its ruling of 26.2.2025 (case reference: 7 K 1811/21 K; an appeal is pending before the Federal Fiscal Court under case reference: I R 7/25) decided that the legal and consultancy costs borne by a parent company that related to the sale of a second-tier subsidiary by a subsidiary company may be deductible as business expenses.
In the case in question, a parent company had engaged external consultants to, among other things, carry out a due diligence review as well as to draft and negotiate the contract, and it had borne the costs of this. The local tax office refused to grant the deduction on the grounds that the expenses needed to be allocated to the subsidiary as the vendor. The FG rejected this. Allocation based on the principles of so-called abbreviated contracting is ruled out due to the lack of a legal basis. Similarly, there was no constructive contribution, as the consulting services received did not constitute an asset eligible for contribution but merely provided benefits to the user.
