Tax planning generally pursues legitimate economic objectives. In practice, however, tax authorities may consider a structure to constitute an abuse of legal arrangements under German tax law.
In such situations, the discussion often moves beyond individual tax provisions and focuses instead on the overall legal and economic assessment of the structure.
The key question then becomes whether the structure has a genuine economic rationale or whether it primarily serves tax purposes.
At this stage, a careful legal analysis can help clarify the background and reasoning of the structure, explain the decision-making process and place the arrangement within its legal framework.
The objective is not confrontation but a clear legal explanation of the structure, ideally before the discussion escalates into a fundamental challenge to the arrangement itself.
In practice, situations of this kind rarely arise from a single isolated decision. Rather, they typically result from a sequence of structural steps – such as corporate reorganisations, transfers of assets or changes in shareholdings – that may each appear legitimate when viewed individually. Only when the overall structure is examined in its economic and legal context does the question arise whether the arrangement still reflects a genuine business purpose.
This illustrates why tax-driven structuring should always be analysed not only from a tax perspective but also from a legal and structural point of view. A careful legal assessment can often clarify whether a particular structure is defensible within the existing legal framework or whether adjustments may be advisable.
Further examples of tax-influenced corporate structures are discussed under Tax-Driven Corporate Structures.
In practice, such discussions often arise during tax audits, when corporate structures are examined more closely. This is discussed in “When Tax Audits Raise Structural Questions.”
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Author: Sabine Unkelbach-Tomczak is a German attorney (Rechtsanwältin) and certified specialist lawyer for tax law. Her advisory work focuses on legal issues at the intersection of tax law, corporate law and cross-border matters.
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