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Profit And Loss Pooling Agreement Definition

December 15th, 2020 in by admin

In the end, any right to damages should now be levied in order to avoid a faulty balance sheet and to ensure the uninterrupted existence of the tax group. For clarity, the obligation to pay interest on the loss claim should be set out in writing in a new profit and loss transfer agreement. Documentation (local file and root file) should not be put in place at the time of the transaction or as part of a tax return, but should be provided only on request during a tax audit. However.B, in the case of exceptional business transactions (e.g., restructuring, cost-sharing, other important long-term agreements), documents must be prepared within six months of the end of the fiscal year in which the transaction took place (but again, it should only be provided on request as part of a tax audit). Contracts for the transfer of profits and losses between two companies are necessary under German tax law to create a corporate tax group (income tax). The Bundesfinanzamt has changed its position of not paying interest on a right to loss compensation in connection with a profit and loss transfer contract and its effects on the status of a tax group. To ensure the existence of a tax group, all claims for damages must now be remunerated. When a parent company holds more than 50% of the voting rights in a subsidiary established in Germany, these two companies can enter into a formal profit and loss pool (PLPA) contract, which must be concluded for a period of at least five years. If certain conditions are met, the resulting relationship is called an organ.

The annual results of an organ are actually grouped at the parent level. The subsidiary of the tax group itself is subject to only 20/17 of the compensation paid to external minority shareholders, if any. Profits and losses within a group can therefore be offset, but there is no provision for the elimination of intra-group profits across the entire taxable base. It should also be noted that negative income collected by the parent company or subsidiary within an organization is excluded from compensation in the same year or another year if a foreign country takes this into account for the taxation of a member of the organization or other organization. Strict formal requirements must be met to form a group of entities in force under German tax law and a new requirement regarding the wording of the loss absorption clause in a profit-loss pool contract (PLPA) may require companies to take action before 31 December 2014. This requirement is relevant in all situations where a German company (limited liability company) is a controlled subsidiary of a tax group. Die Deutsche Bahn Gruppe sagt, die Gewinnabf-hrungsvertr-ge seien notwendig, um die Aktion-rsrechte zu schotzen. Shareholders of the parent company have the right to benefit from the company`s profits, including the profits of the subsidiaries. However, the parent company is also required to cover the losses of subsidiaries.

The agreement sets the rules in writing instead of letting management decide each year. The minimum duration of an agreement is five calendar years. According to the Schleswig-Holstein Ministry of Finance in its decree of 22 February 2016, the BMF`s opinion is no longer applicable.

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