German VAT groups: detailed specification of organisational integration
By Olga Selmer, Nörenberg • Schröder
On 7 March 2013, the German Ministry of Finance issued guidance notes in which it specified organisational integration as one of the requirements for the existence of a VAT group, in addition to financial and economic integration. The new definitions are being embraced by professional circles as, prior to these changes, the question as to whether organisational integration should be a requirement in establishing a VAT group was the one that most divided opinion.
The general rule for organisational integration is that the management of both parent and controlled entities should be linked in such a way that the controlling company can always execute its will within the controlled company. Appointing the same individuals as directors in both controlling and controlled companies ensures this organisational integration, but this approach is not essential when the enforcement of the will of the parent company can be ensured by other means. Nevertheless, problems may arise if, for example, the controlled entity has several directors and some of them are not involved in the management of the parent company. In this case, the existence of organisational integration depends on the power of direction within the controlled company. Different possibilities as to how the power of direction may affect organisational integration are also described in the guidance notes.
The new regulations apply on all open cases with retrospective effect from 1 January 2013. VAT groups that were established according to previous regulations, and where all participants assume the existence of the VAT group, may continue to operate under the previous regulations on sales until 1 January 2014.
Nörenberg • Schröder Rechtsanwälte Wirtschaftsprüfer Steuerberater Partnerschaft, Hamburg, Germany
T: +49 404 419 60 01
Olga Selmer has ten years' experience in compliance, accounting and tax advisory for nationally and internationally operating companies. She advises individuals and medium-sized companies on tax structure consulting, VAT, international taxation, mergers and acquisitions and appeal procedures. Her clients operate in trade, renewable energies, private equity, architecture and e-commerce. Olga speaks English, German, Russian and Ukrainian.
Nörenberg • Schröder is an interdisciplinary association of lawyers, certified accountants and certified tax advisors with its main areas of activity in auditing, tax advisory, legal advisory and transaction services.
published: July 2013