Although consolidated tax returns are not allowed under German
tax law per se, the rules governing tax groups (Organschaft)
provide similar relief.
Under the Organschaft system for corpo-
rate income tax purposes, the income or loss of a controlled
company (Organgesellschaft) is attributed to a controlling entity
(Organträger). In order to qualify, the controlling entity and the
controlled company must enter into a proft and loss pooling
agreement (Ergebnisabführungsvertrag), and the controlled
company must be fnancially integrated into the controlling entity.
This requires that the controlling entity holds a majority of the
voting rights in the controlled company.
Financial integration can
be achieved through direct or indirect shareholdings. The profit
and loss pooling agreement must be entered into for a minimum
period of fve years.