Additional transfers caused by the tax group as notional profit distributions: “Prohibition of offsetting”

It was disputed whether the distribution charge pursuant to Section 38 of the German Corporation Tax Act (Körperschaftsteuergesetz - KStG) should be established for so-called additional transfers caused prior to the formation of the tax group, which are deemed to be profit distributions by the tax group subsidiary to the tax group parent.

After the Federal Fiscal Court initially referred the appeal proceedings to the Federal Constitutional Court, which classified the regulation as unconstitutional in certain factual constellations, the Federal Fiscal Court reopened the proceedings and confirmed its case law, according to which additional transfers caused by the tax group parent result in an increase in corporation tax pursuant to Section 38 KStG.

In their article, POELLATH professionals Raphael Baumgartner and Bianca Disch summarize the specific facts on which the decision was based and why the Federal Fiscal Court ruled as it did.