Germany: Requirements for performance of profit transfer agreement in a tax group (Federal Fiscal Court decision)
Obligations to transfer profits and assume losses within a tax group must be fulfilled in a timely manner (12 months)
The Federal Fiscal Court has clarified that obligations to transfer profits and assume losses within a tax group must be fulfilled in a timely manner, with a 12-month period after the due date considered sufficient. The court specified that claims under the profit and loss transfer agreement (PLTA) can be settled using a clearing account, provided it is not a “non-genuine” clearing account where neither counterclaims nor lump-sum payments are recorded, and regular account reconciliation is performed.
KPMG observation
This decision emphasizes the importance of reviewing existing policies regarding the settlement of profit and loss compensation claims under the PLTA. It is crucial to understand how and when the settlement of profits and losses is executed, particularly focusing on losses incurred by controlled entities. The loss compensation claim generally becomes due at the balance sheet date upon expiry of the controlled entity’s financial year, and the 12-month period must be observed from that date.
Read a March 2026 report prepared by the KPMG member firm in Germany