The formation of a German tax group requires that the parent company and group company conclude a profit and loss transfer agreement. The requirements for such an agreement to be recognised for German tax purposes have been changed several times over the last decade, in particular, the requirement that the parent company be held liable, under the agreement, for any losses of the group company where the group company is a German limited liability company (Gesellschaft mit beschränkter Haftung – GmbH). Section 17 of the German Corporate Income Tax Act (KStG) – in its latest version – requires for such tax groups , inter alia, the agreement includes a dynamic reference to the statutory rules governing the assumption of liability for losses where the group company is a German stock corporation (Aktiengesellschaft – AG), as set out in section 302 of the German Stock Corporation Act (AktG).
In 2004, section 302 AktG was amended with the introduction of a new paragraph 4, which imposed a 10-year time limit on claims relating to liability for losses. Since many profit and loss transfer agreements with GmbH group companies that were concluded before 2004 simply included the wording from the earlier version of section 302 AktG (i.e., without the new paragraph 4) or only referred to section 302, paragraphs 1-3 AktG, they did not contain the new language set out in section 302, paragraph 4 AktG and so did not comply with section 17 KStG (nor, indeed, did they comply with the earlier version of section 17 KStG).