The Annual Tax Act 2026, currently under consultation, includes a provision that would materially revise Germany’s VAT grouping (Organschaft) rules. The proposal would require a prospective group parent to make an explicit declaration that a VAT group is intended, and it also would confirm that partnerships may be included in a VAT group provided the integration requirements are met.
Under the current rules, legally independent entities may be treated as a single VAT person provided they are closely integrated financially, economically and organisationally. A VAT group can exist automatically when these requirements are met, without any affirmative election. The key benefits of VAT grouping are the elimination of VAT on intragroup transactions, simplified VAT compliance as only one return has to be filed for all group companies, as well as administrative efficiencies and improved cash flow.
Because entities currently cannot opt in or out of a VAT group, some may be unaware that they are part of a group. The proposed change seeks to address this by requiring the VAT group parent to formally notify the German tax authorities of the group’s existence and detail who is part of the VAT group.
The measure that clarifies that partnerships may qualify as members of a VAT group aims to implement decisions of the Court of Justice of the European Union and Germany’s Federal Fiscal Court.
If enacted, the new rules would apply as from 1 January 2029, with declarations permitted as from 1 July 2028.
Annette Pogodda-Grunwald
Daniel Auer
BDO in Germany
Under the current rules, legally independent entities may be treated as a single VAT person provided they are closely integrated financially, economically and organisationally. A VAT group can exist automatically when these requirements are met, without any affirmative election. The key benefits of VAT grouping are the elimination of VAT on intragroup transactions, simplified VAT compliance as only one return has to be filed for all group companies, as well as administrative efficiencies and improved cash flow.
Because entities currently cannot opt in or out of a VAT group, some may be unaware that they are part of a group. The proposed change seeks to address this by requiring the VAT group parent to formally notify the German tax authorities of the group’s existence and detail who is part of the VAT group.
The measure that clarifies that partnerships may qualify as members of a VAT group aims to implement decisions of the Court of Justice of the European Union and Germany’s Federal Fiscal Court.
If enacted, the new rules would apply as from 1 January 2029, with declarations permitted as from 1 July 2028.
Annette Pogodda-Grunwald
Daniel Auer
BDO in Germany