Service and financial relationships in DB Group

Within DB Group, because of strong operational interconnections and dependencies, there are service and financial relationships between the management holding company DBAG and the individual business units, as well as between business units.

These can be organized into four groups:

• Operational service relationships between two companies, which may arise through the use of infrastructure, such as when DB Regio AG uses train paths, for which it pays train-path usage fees.
• Service relationships with Group management: DB AG provides services to the operating companies, such as central purchasing.
• Group financing: DB AG performs and consolidates the financing function in DB Group. In this context, DB AG obtains funds on the capital market through its financing subsidiary Deutsche Bahn Finance GmbH (DB Finance) and transfers these funds to the Group companies as loans.
• Domination and profit and loss transfer agreements: In Germany, domination and profit and loss transfer agreements are used for the formation of a consolidated tax group that allows companies to offset tax losses against profits. In DB Group, the company ultimately subject to tax in Germany is DB AG.

The arm’s length principle is fundamental in the development of service relationships. This means that compensation is always based on market prices. In DB Group this applies to charges for operational service relationships, service units and Group financing. Intra-Group customers pay the same fees for utilizing train-paths as non-Group customers. The prices of intra-Group services are reviewed regularly on the basis of market analyses to ensure that they are in line with the market. The terms of financing transactions are based on prevailing market conditions in the financial and capital markets. Governance functions perform controlling and monitoring roles. These services are generally not charged. By contrast, the services of the service units are generally charged to the intra-Group recipients of the service, in relation to the service provided.

The reasons and motivation for aligning intra-Group transactions with market conditions are as follows:

• A value-based corporate management approach can only be successful if it is embedded at all levels in DB Group. This, in turn, can only be achieved on the basis of intraGroup transactions that operate on the basis of fair market conditions. Success and failure must be transparent in order to facilitate economic management.
• Rail infrastructure companies are legally required to provide their services without discrimination. The Federal Network Agency (Bundesnetzagentur; BNetzA) assesses whether prices are in line with the market. Prices are transparent for everyone.
• Alignment of service relationships with market conditions is also both necessary and stipulated for tax reasons and from the perspective of minority shareholders.

The effects of domination and profit and loss transfer agreements within DB Group on net profits and payments are not qualified as service relationships, but are a consequence of DB Group’s status as a domestic contract group and the associated rights and obligations of all the incorporated domestic companies.