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Check your profit transfer agreements – A dynamic reference is now required

In the past, the wording of profit and loss transfer agreements has increasingly resulted in disapproval between the fiscal authority, courts and lawmakers. The reason for this was the amendment to the Stock Corporation Act (Aktiengesetz, AktG) and also the delay to the Corporation Tax Act. Consequently, a profit and loss transfer agreement that was concluded with a GmbH [German private limited company] as a consolidated tax group, from then on, had to contain not a static reference but, instead, a dynamic reference to Section 302 AktG.

Dynamic in this sense means that it has been agreed that the reference is to the provisions as amended in Section 302 AktG. According to a Federal Ministry of Finance circular from 24.3.2021, profit and loss transfer agreements that were concluded or last changed before 27.2.2013 that still contain a static reference will have to be amended, at the latest, by the end of 31.12.2021. Moreover, such an amendment to a profit and loss transfer agreement will not be deemed to be the conclusion of a new contract and that is why a new five-year minimum term would not begin again.

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