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Profit And Loss Pooling Agreement Definition

In accordance with the acquis rights protection rule that accompanied the amendment of the law, the revised requirement is mandatory for the recognition of a consolidated tax group for all EPAs concluded or amended after 26 February 2013; However, it is not necessary to amend the PGPs closed before that date. However, if the provision for loss absorption in a PLPA before 23 February 2013 does not comply with the formulation requirements of the existing legislation, the deficiency can be corrected by: according to the Ministry of Finance of Schleswig-Holstein in its regulation of 22 February 2016, the opinion of the BMF is no longer applicable. A breach of the interest rate obligation on a right to compensation for losses within the meaning of Paragraphs 352 to 353 of the HGB Code now leads to a deficient book value and the business balance sheet of the audited undertaking does not subsequently indicate the correct profit. Under the new regime, the payment of amounts based on such results constitutes an incomplete payment of the profits of the profit shifting contract. In this case, the existence of the tax group can no longer be presumed. Section 14 of the Corporate Tax Act (KStG) is then the only remedy available. Under the KStG, the profit transfer agreement is considered to be unharmed, despite the error, if the following conditions are met: If a parent company holds more than 50% of the voting rights in a subsidiary established in Germany, both can conclude a profit and loss consolidation contract (PLPA) officially registered by the courts, which must be concluded for a period of at least five years. When certain conditions are met, the resulting relationship is called an institution. Indeed, the annual results of an institution are grouped at the parent level. The subsidiary of the tax group itself is taxable only for 20/17 of the remuneration paid to external minority shareholders, if any. Profits and losses within a group can therefore be offset, but there are no plans to eliminate intra-group profits from the total tax base. It should also be noted that negative income of the parent enterprise or subsidiary incurred within an institution is excluded from offsetting in the same or another year when a foreign country takes it into account in the taxation of an organ member or other entity. On 14 February 2005, the Bundesgerichtshof (II ZR 361/02) confirmed that a right to set-off losses arises from a profit shifting agreement on the balance sheet date of the audited undertaking and that it was due on the day of demarcation.

The date of preparation of the annual accounts is essential and the right to compensation for losses is remunerated from the balance sheet date, in accordance with Articles 352 to 353 of the Criminal Code. Before 26 February 2013, a PLPA had to contain a provision for loss absorption within the meaning of Paragraph 302 of the AktG. In accordance with the amended rules applicable from that date, the PLPA must contain a loss-absorbing provision specifically relating to the current version of Section 302 as amended. the PLPA must contain the appropriate text for the agreement to be valid; Failure to use the corresponding wording could lead to the invalidation of tax consolidation, so that companies that are part of the PLPA could be taxed on a stand-alone basis rather than on a consolidated basis.. . . .

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