Consolidated tax returns are not allowed under German tax law

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.