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German Government Clarifies Requirements For LLC Tax Status

by Ulrika Lomas, Tax-News.com, Brussels

07 April 2004

The German tax authority late last month released a notice clarifying the classification of limited liability companies, or LLCs, as partnerships or corporations for tax purposes.

The guidelines issued by the tax department revealed the criteria used to determine whether a business is a partnership or a corporation. They included:

  • Centralized management;
  • Limited liability;
  • Distributions;
  • Allocation of profits and losses;
  • Registration; and
  • Capital contributions.

Speaking to the LMG news service, Clifford Chance tax lawyer, Roderic Pagel praised the publication of the new guidelines, observing that:

"It is now possible to achieve the desired tax treatment of an LLC in Germany by setting up an LLC along the criteria set by the tax authorities. This means that the LLC is now, from a German tax perspective, a tool with great flexibility."

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