The EU Commission on July 25 decided to send a letter of formal notice to Germany for refusing to recognize profit and loss transfer agreements, a precondition to tax consolidation in Germany, entered into by companies that are relocating their place of management to Germany.
German tax administration requires that the profit and loss transfer agreement be registered at the seat of the company while refusing to recognize the registration with a commercial registrar in another EU/EEA Member State as being equivalent with the registration with a domestic commercial registrar, the Commission said.
Because of this practice, contrary to EU law freedom of establishment principles, a group of companies is treated less favorably than groups of which all the members have their registered offices in Germany. The practice also deters companies established in another EU/EEA State from establishing a business in Germany, the Commission said.
The Commission gave Germany two months to act. Otherwise, the Commission said it may send a reasoned opinion to the German authorities.
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