Skip to content

German CFC rules — the separate determination return under § 18 AStG

Where a person with unlimited German tax liability — a GmbH just as much as an individual — controls a foreign company, that company's low-taxed passive income is taxed in their hands in proportion to their holding, even if nothing is distributed (controlled foreign company rules, Hinzurechnungsbesteuerung, § 7(1) AStG). Control means holding, alone or with related persons, MORE THAN HALF of the voting rights, the nominal capital or the entitlement to profit or liquidation proceeds (§ 7(2) AStG). Income is low-taxed where its income tax burden is LESS THAN 15 PERCENT (§ 8(5) AStG). The tax bases are determined separately — and uniformly where there are several participants (§ 18(1) AStG) — and EVERY person holding directly or indirectly must file a return for it electronically (§ 18(3) sentence 1 AStG): that is this ELSTER form.

Up to date for 2026 — verified on September 23, 2026Official procedure, no printed formGuide: about 60 min

Deadlines

Reference point: the end of the foreign company's financial year
§ 7(2) AStG — control is tested at that date; the attributed amount is deemed received in the assessment period in which that financial year ends (§ 10(2) sentence 1 AStG)
Return for the separate determination: for every financial year with intermediate-company income
§ 18(3) sentence 1 AStG — the provisions on conducting taxation apply correspondingly to the deadline (§ 18(1) sentence 4 AStG, § 181(1) sentence 1 AO)
Anyone claiming the substance exception: a notice instead of a return, with the same deadlines
§ 18(3) sentences 2 and 3 AStG — the tax office may nonetheless require the full return (sentence 4)

Documents to prepare

  • ELSTER access with a certificate or an ELSTER business account
  • Overview of holdings at the end of the foreign company's financial year: voting rights, nominal capital, profit entitlement, including indirect holdings and related persons
  • The foreign company's annual accounts and a breakdown of its income by activity
  • Reconciliation of the income to German tax law, with the related business expenses
  • Evidence of foreign income taxes — assessed, actually collected and refundable on distribution
  • For EU or EEA companies: documents on premises, equipment and qualified local staff
  • Details of the other participants, if a joint return is filed
See the procedure on the official site

No form is attached to this procedure: the link leads to the official page that describes it.

What this page gives you

The guide above and the link to the official site. ActioFin does not produce any document for this page: whatever you fill in or file is done on the official medium.

Who this applies to

  • Persons with unlimited tax liability who control a foreign company with neither its seat nor its management in Germany (§ 7(1) sentence 1 AStG) — including through intermediate companies, since indirect holdings count
  • Anyone reaching the control threshold only TOGETHER with related persons (§ 7(2) and (3) AStG) or with persons acting in concert in relation to the intermediate company (§ 7(4) AStG)
  • Persons with limited tax liability, to the extent the holding is attributable to a German business permanent establishment (§ 7(1) sentence 4 AStG)
  • Every taxpayer holding directly or indirectly in the foreign company must file — a joint return fulfils the duty for all (§ 18(3) sentences 1 and 5 AStG)
  • NOT for income from the active activities listed in § 8(1) AStG — for instance agriculture and forestry, or the manufacture, processing and assembly of goods (nos. 1 and 2); trade and services only under the conditions set out there (nos. 4 and 5)
  • NOT for income bearing an income tax burden of at least 15 percent (§ 8(5) AStG) — unless the tax, though legally owed, is not actually collected
  • NOT to be confused with the notification of matters with a foreign connection under § 138(2) AO: that reports a one-off EVENT, such as first gaining controlling influence over a third-country company — this return determines the tax bases year after year

Worked example

Präzisionsteile Lorenz GmbH holds 60 percent of a foreign licensing company

The GmbH, based in Germany, holds 60 percent of the shares in a foreign corporation that licenses patents to it but carries out no research of its own. With more than half of the nominal capital at the end of the financial year, control is established (§ 7(2) AStG). The licence income of 400,000 euros does not come from an active activity: licensing rights is excluded from active letting unless it is shown that the company exploits its own research results produced without the shareholder's involvement (§ 8(1) no. 6(a) AStG). The income, computed under German tax law (§ 10(3) AStG), comes to 300,000 euros after deducting the related business expenses (§ 10(4) AStG); on management's calculation its income tax burden is below 15 percent — so it is low-taxed (§ 8(5) AStG). The company is an intermediate company, and 60 percent of the intermediate income, 180,000 euros, is taxable in the GmbH's hands (§ 7(1) sentence 1 AStG). Because the shares are business assets, the attributed amount increases the GmbH's profit for the financial year in which the foreign company's financial year ends (§ 10(2) sentence 2 AStG), without the exemption in § 8b(1) KStG (§ 10(2) sentence 4 AStG). The GmbH files the return for the separate determination through ELSTER (§ 18(3) sentence 1 AStG); the second shareholder, also fully taxable in Germany, may file jointly with it (sentence 5). The competent tax office is that of the participant with the largest holding (§ 18(2) sentence 2 AStG). The figures are illustrative.

How to fill it in, step by step

  1. Test control at the end of the foreign company's financial year: more than half of the voting rights, the nominal capital or the entitlement to profit or liquidation proceeds, directly or indirectly, alone or with related persons (§ 7(2) AStG).
  2. Assign each of the company's income sources to the catalogue in § 8(1) AStG: active (nos. 1 to 9 with their conditions) or passive.
  3. Compute the passive income under German tax law (§ 10(3) AStG), deducting only business expenses economically connected with it (§ 10(4) AStG).
  4. Compute its income tax burden, including any claims the foreign state grants on distribution, and check whether it is below 15 percent (§ 8(5) AStG).
  5. Where the company has its seat or management in the EU or EEA, consider proving a substantial economic activity with its own premises, equipment and staff (§ 8(2) and (3) AStG) — a notice then suffices (§ 18(3) sentence 2 AStG).
  6. Agree with the other participants whether a joint return will be filed (§ 18(3) sentence 5 AStG) and identify the competent tax office (§ 18(2) AStG).
  7. Log in to Mein ELSTER, select the form for the separate and uniform determination under § 18 AStG and submit the return.
  8. Report the attributed amount in your own income or corporation tax return for the period in which the foreign company's financial year ends (§ 10(2) AStG).
  9. Check separately whether a notification under § 138(2) AO is due for the same year — it is a different obligation.

Good to know

  • Attribution reaches income that is not distributed: the attributed amount is deemed received (§ 10(2) sentence 1 AStG).
  • For private assets the attributed amount is investment income under § 20(1) no. 1 EStG; for business assets it is business income (§ 10(2) sentences 1 and 2 AStG) — and § 3 no. 40 sentence 1(d) EStG, § 32d EStG, § 8b(1) KStG and § 9 no. 7 GewStG do not apply (sentence 4).
  • A negative amount is not attributed (§ 10(1) sentence 2 AStG); losses from intermediate income may be carried forward applying § 10d EStG correspondingly, but not carried back (§ 10(3) sentences 5 and 6 AStG).
  • The substance exception in § 8(2) AStG applies only to companies with their seat or management in the EU or EEA (§ 8(3) AStG), and not where the state does not provide the information needed for taxation (§ 8(4) AStG).
  • Indirect holdings are disregarded to the extent attribution has already taken place at the intermediate person and the income is therefore not low-taxed overall (§ 7(1) sentence 2 AStG).
  • For the partners of a partnership holding an interest in an intermediate company, acting in concert is presumed, rebuttably (§ 7(4) sentence 2 AStG).
  • What is determined includes the attributed amount, the creditable taxes, the attribution correction volume and the loss carryforward (§ 18(1) sentence 1 AStG).
  • A tax audit to establish the tax bases is permitted at every participant (§ 18(5) AStG).
  • The notification under § 138(2) sentence 1 no. 4 AO concerns only third-country companies outside the EU and EFTA (§ 138(3) AO); CFC taxation knows no such limit — a controlled company in an EU state can be an intermediate company.

Common mistakes

  • Assuming the rules bite only on companies outside the EU. § 7 AStG covers every foreign company; for the EU and EEA there is only the substance exception in § 8(2), which must be proven.
  • Testing control on your own stake alone. Related persons and concerted action are attributed (§ 7(2) to (4) AStG).
  • Always treating trading or service income as active. § 8(1) nos. 4 and 5 AStG make it passive where participants or related persons are involved in certain ways, unless a business operation of the company's own is shown.
  • Measuring the burden against the nominal foreign tax rate. What counts is income computed under German law (§ 10(3) AStG), refund claims on distribution are included, and tax not actually collected does not count (§ 8(5) AStG).
  • Believing the notification under § 138(2) AO replaces this return. It reports a matter; the return under § 18(3) AStG determines the tax bases.
  • Filing nothing when claiming substance. A notice with the details of the activity and the holdings must still be submitted (§ 18(3) sentences 2 and 3 AStG).
  • Forgetting the attributed amount in your own tax return. It must be included by the taxpayer (§ 10(1) sentence 1 AStG).

Frequently asked questions

When do I control a foreign company?

When, alone or together with related persons, at the end of the relevant financial year, more than half of the voting rights or of the shares in the nominal capital are attributable to you directly or indirectly, or you are entitled to more than half of the profit or liquidation proceeds (§ 7(2) AStG).

When is taxation low?

When the intermediate income computed under § 10(3) AStG bears an income tax burden of less than 15 percent, without this resulting from offsetting against other income; refund claims on distribution are included, and tax that is owed but not collected does not count (§ 8(5) AStG).

Who has to file?

Every taxpayer holding directly or indirectly in the foreign company; a joint return fulfils the duty (§ 18(3) sentences 1 and 5 AStG). On application, the tax office may waive electronic filing to avoid undue hardship (sentence 6).

Which tax office is competent?

The office competent for the taxpayer's income from the holding; where there are several participants, the office of the participant with the largest holding (§ 18(2) sentences 1 and 2 AStG).

How does this differ from the notification under § 138(2) AO?

The notification reports an event — such as first gaining controlling influence over a third-country company — together with the tax return, at the latest 14 months after the end of the tax period (§ 138(2) sentence 1 no. 4 and (5) AO). The return under § 18 AStG determines the tax bases for every year with intermediate income. Both duties can apply side by side.

My company is in the EU and has real staff. Do I still have to do anything?

Yes: anyone claiming that attribution does not apply because of a substantial economic activity must notify this, with the name, address, activity, holdings and identifiers of the participants (§ 18(3) sentences 2 and 3 AStG).

Go further

Compute the related amounts

Related forms

Official sources

Read in German

Guide and document provided for information purposes only; they do not constitute personalised legal or tax advice. Check the recipient organisation's requirements and consult a professional if needed.