In recently published guidance issued by the tax authorities, the BMF confirmed that German profit and loss pooling agreements (PLPAs) do not need to be amended following the amendment to the rule governing the maximum profit to be transferred under the German Stock Corporation Act in connection with the Commercial Code. PLPAs oblige the controlled entity to transfer all of its profits to the controlling entity and oblige the controlling entity to compensate all the losses of the controlled entity. These agreements are governed by corporate law but are also one of the tax requirements for forming a German tax group. Even though PLPAs need not be amended following the German Accounting Reform, taxpayers will need to observe the new rules when determining the correct profit to be transferred under a PLPA.
