Integrated Fiscal Units & Corporation Tax ("koerperschaftsteuerliche Organschaft")
In an integrated fiscal unit a profit and loss pooling agreement is reached, under which a company that in itself is legally independent (the controlled company - "Organgesellschaft") agrees to become dependent on another company (the controlling company - "Organträger").
The controlled company undertakes to pay over its entire revenue to the controlling company. Another requirement is that the controlling company has to hold the majority of voting rights in the controlled company (financial integration).
In tax terms, recognition of an integrated fiscal unit means that the revenues of the controlled company are allocated to the controlling company. This provides an opportunity to balance profits and losses amongst the integrated companies.
The requirements having to be met for creating an integrated fiscal unit are various, and are closely monitored by the competent tax office.
Integrated fiscal units can be created between companies with unlimited tax liability. A branch of a foreign company that is established in Germany and entered in the Commercial Register may also become a controlling company.
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