May act as self-employed persons
Individuals who manage and represent companies in which they
are partners or shareholders may act as self-employed persons
if certain criteria are met. Corporations are considered to always
act as self-employed, even if the corporation must comply with
instructions adopted by shareholder resolution (but see below
Organschaft – tax group for VAT purposes).
An exchange of consideration is possible between partnerships
or corporations and their partners/shareholders. Transfers for no
consideration from corporations/partnerships to their sharehold-
ers/partners may trigger VAT liability. Shareholder/partner contri-
butions may also be subject to VAT unless they are discharged
merely by sharing in the proft or loss.
Generally, when one or more businesses in Germany are “in-
tegrated” – according to the defnition below – with each other
in substance, they are treated as a single business for German
VAT purposes under the Organschaft rules. The rules may need
to be reinterpreted depending on CJEU jurisdiction. Currently,
an Organschaft requires a controlling entity (Organträger) and
a controlled company (Organgesellschaft).
The latter must be a
corporation (in particular AG, GmbH). Integration for VAT purpos-
es is required fnancially, economically and organizationally:
– Financial integration – the members of the Organschaft must
be under common control (control being defned as more than
50% of voting rights).
– Economic integration – the controlling entity in the Organ-
schaft must exercise actual infuence over the business of
the controlled company and the controlled company must
serve, promote, and supplement the business of the entire
– Organizational integration – the controlling entity in the Organ-
schaft must be in a position to ensure that its instructions are
followed by the controlled company, for example by having
identical management boards.
Other kinds of control has
to be examined on a case-by-case basis whether they are