In its decision dated February 26, 2025 (7 K 1811/21 K), the Düsseldorf Fiscal Court concluded that legal and consulting fees incurred by the indirect sale of a second-tier subsidiary by the subsidiary are deductible business expenses of the plaintiff; this applies irrespective of an income tax group between the parent and its subsidiary.
The plaintiff has incurred costs for legal and consulting services in relation to the sale of all shares in a sub-subsidiary by its subsidiary. Further, the plaintiff and its subsidiary had established an income tax group.
While the plaintiff treated the legal and consulting fees as fully deductible business expenses, the tax office treated these as selling costs and, as a consequence, 5% thereof would be taken into consideration as non-deductible pursuant to Section 8b (2) and (3) Corporate Income Tax Act (KStG).
The Düsseldorf Fiscal Court states that the legal and consulting fees are fully deductible business expenses of the plaintiff. Neither the corporate structure nor the existing fiscal unity for income tax group with its subsidiary gives reason to classify the expenses as selling costs.
Pursuant to the Düsseldorf Fiscal Court, such legal and consulting fees do not constitute a constructive contribution to its subsidiary, since such services do not qualify as an asset, which can be contributed. Further, the plaintiff has no statutory or contractual claim for reimbursement against its subsidiary. This is because the legal and consulting fees are a separate liability of the plaintiff, i.e., there is neither an abbreviated payment nor an obligation arising out of an action performed without due authority, which would allow a reallocation of such costs to the subsidiary.
The Düsseldorf Fiscal Court also rejects a qualification of the legal and consulting fees as the plaintiff's own selling costs pursuant to Section 8b (2) KStG, as there has not been an actual disposal at the level of the plaintiff. In addition, there are no expenses at the level of the selling subsidiary that could be allocated to the controlling company as selling costs due to the income tax group. Finally, the non-deductibility of expenses in relation to a participation under Section 8b (3) KStG is not relevant due to the lack of participation-related expenses.
Last, the Düsseldorf Fiscal Court also rejects the assumption of a so-called “abbreviated contractual route,” as the plaintiff has used the legal and consulting services in its own interest.
An appeal against the decision is permitted.
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