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Module II· Valuation — Regional NotesIntermediate
Question

What is a tax group (fiscal unity), and what tax advantages does it offer groups?

Answer
Tax group / fiscal unity (corporate income tax + local business tax)

tax consolidation between a parent (the controlling entity) and a subsidiary. Requirements:

  • Financial integration: the parent holds ≥50% of the voting rights.
  • A domination and/or profit-transfer agreement in place for at least 5 years.
  • The subsidiary is a separate legal entity. Tax effect: (a) the subsidiary's losses can be offset against the parent's profits (or those of other subsidiaries) — immediate loss utilization. (b) Consolidated taxation at the parent level. Valuation implication: the value of loss carryforwards can be used immediately where a fiscal unity exists, instead of carrying them forward over several years. NPV effect: typically +2–8% on group EV where there are loss-making subs. A VAT fiscal unity is also possible — intra-group supplies are not subject to VAT.
Deep diveShow more details
Pitch tip

"In M&A structuring, fiscal unity is often the lever — for carve-out targets, check whether loss carryforwards are still usable (watch the change-of-ownership trap!)."

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