Germany: Guidance on dual consolidated loss rule

Guidance on the dual consolidated loss (DCL) rule of the German tax group scheme

Guidance on the dual consolidated loss (DCL) rule of the German tax group scheme

The German Federal Ministry of Finance (BMF) issued guidance (14 January 2022) on the dual consolidated loss (DCL) rule of the German tax group scheme and simultaneously stated that a decision by the German Federal Tax Court is not applicable beyond the specific case that was decided.

According to the German DCL rule, negative income of a tax group parent may not be considered if it is (also) considered in a foreign jurisdiction in the taxation of the tax group parent, the tax group subsidiary, or another person.

The German Federal Tax Court (BFH) held in October 2016 that the German DCL rule did not apply to a situation in which a Dutch corporation borrowed funds to acquire interests in a German partnership, which was the tax group parent of a German corporation as a tax group subsidiary, and the interest expense was deducted in both the Netherlands and Germany.

The BMF stated in its recent guidance that the decision of the German Federal Tax Court is not applicable beyond that individual case.

Read a March 2022 report [PDF 344 KB] prepared by the KPMG member firm in Germany

 

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