Permanent establishment

Service location is a concept of national and international tax law. In the national tax law to establish the existence of a permanent establishment of various legal consequences. In the multilateral law of the so-called double taxation agreement acknowledges the existence of a permanent establishment allows the so-called permanent establishment principle, the state income tax access to the income generated by these (see Article 5, 7 OECD Model Convention ). Also, the European law ties in various tax areas of regulation in the German language version of the concept of permanent establishment.

Domestic law

In accordance with § 12 Section 1 of the Tax Code (AO) is a permanent establishment in any fixed place of business or investment that serves the business of an enterprise. Permanent establishment are regarded as especially important: the place of management, branches, offices, manufacturing or repair shops, warehouses, single or outlets, mines, quarries, or other standing, locally progressive or floating sites of mineral extraction, construction work or montages, even locally, progressive or floating if either the individual construction or assembly or if a temporary coexistence of multiple construction work or installation, or when several take without interruption consecutive Bauausführungen or montages longer than six months.

Wage tax

The case of income from employment, ie Wages and salaries, income tax is withheld from wages collected ( payroll taxes), unless the wages paid by an employer who has a domicile, habitual residence, his management, head office, a permanent establishment or a permanent representative in Germany ( domestic employer, § 38 para 1 German Income Tax Act ). Permanent establishment in the specific wage tax purposes is the operation or part of the establishment of the employer in which the otherwise applicable to the implementation of the PAYE wages is determined ( § 41 para 2 of the Income Tax Act ).

Business tax

The municipal trade tax also is linked to the business enterprise. The business tax is subject to any existing commercial operation, as will maintain a permanent place for him in Germany (§ 2 Trade Tax Act, Trade Tax Act ). If a company has more than one site, then the trade income to decompose, so that each situs community is entitled to a portion of the trade tax revenue. Measure of the decomposition is regularly the ratio of the wage totals, see § § 28 et seq GewStG.

Income tax / corporation tax

Non-residents, that is, Persons who are not resident or ordinarily resident in the country, are limited to income tax if they achieve domestic income within the meaning of § 49 of the Income Tax Act ( § 1 para 4 ITA). The same applies to foreign corporations ( § 1 para 2 Corporate Income Tax Law, Corporation Tax Act ). Entities that have neither their management nor their registered office in Germany, corporation tax with their domestic income.

Domestic income in this sense are business income to be generated in a property on the domestic permanent establishment ( § 49 para 2 No. 2 of the Income Tax Act ).

Unlimited tax persons and entities are generally subject their worldwide income taxation in Germany. In establishments abroad generated revenues flow into the domestic tax base. But on such foreign branch income and the permanent establishment state will access tax. According to national law can - to avoid or reduce double taxation of the same profits - such abroad raised, similar tax be ( maximum amount the related domestic tax ) credited against the domestic tax ( § 34 Income Tax Act, so-called imputation method ).

Exists between the states involved a double taxation agreement (see below Bilateral Agreement Legal ), the profit of the foreign operation, after this, if necessary, cropped, that are eliminated from the domestic tax base and then only exposed to the situs State of taxation ( the so-called exemption method). If this is not the imputation method, comparable to the national law.

Achieves not situated in an EU Member State or EEA State foreign permanent establishment losses, these can only be offset against positive income from other facilities in the same state, a surplus will be carried forward and be in the taxation beyond not considered ( see § 2a Section 1 of the Income Tax Act ), unless the affected permanent establishment shall exercise at least 90% so-called active activities from, for example, Manufacture and supply of goods ( § 2a, paragraph 2 ITA). Losses from EU or EEA premises are to be considered, reducing profit rule, under the domestic tax base, so they can be offset against domestic profits.

Bilateral agreement law

If a company do business in multiple states, each state may tax those earnings, for a starting point arises on its territory. Since a multiple taxation of corporate profits is to be avoided, several states have double taxation agreements in which they each other " split " the right of taxation. Germany has the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (OJ 1990 L 225 /10), signed the deal in the event of a dispute with the determination of prices for goods and services within multinational corporations. Where an enterprise of its business in another State through a permanent establishment situated in the profits of the enterprise may be taxed in that other State to the extent that they can be attributed to that permanent establishment (Article 7 OECD Model Convention 2008/2010 ).

Agreement Legal means "permanent establishment " means a fixed place of business through which the business of an enterprise is wholly or partly carried on (Art. 5 § 1 of the OECD ). Permanent establishment includes, under Article 5 § 2 of the OECD Model, in particular a place of management, a branch, an office, a factory, a workshop, and a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. A construction or installation is only a permanent establishment if the duration exceeds twelve months (Article 5, paragraph 3 of the OECD Model ). Under Article 5 § 4 OECD.MA not be regarded as business premises, facilities which are used exclusively for storage, display or delivery of goods or merchandise belonging to the enterprise; Stock of goods or merchandise belonging to the enterprise which are solely for the purpose of storage, display or delivery; Stock of goods or merchandise belonging to the enterprise which are solely for the purpose of being worked or processed by another enterprise; to purchase, or for collecting information, a fixed place of business which is solely for the purpose of purchasing goods or merchandise for the enterprise; maintenance of a fixed place of business which is maintained solely for the purpose for the company's other activities which have a preparatory or auxiliary character; a fixed place of business which is maintained solely for the purpose of carrying more of the above activities, provided that the resulting overall activity of the fixed place of business is a preparatory or auxiliary character.

The activity of a broker, commission agent or other independent representative is not generally leads to a permanent establishment of the client, provided that they act in the ordinary course of their business activities (Article 5, paragraph 6 of the OECD ). A subsidiary or other controlled company does not form a permanent establishment of the parent company or controlling company (Art. 5 para 7 of the OECD Model ). The agreement takes precedence over the legal interpretation under national law (see Article 3, paragraph 2 of the OECD Model ). Double taxation treaties take precedence over domestic law (Article 2 § 1 AO ).

European law

Under Article 2, Section 1 of the so-called parent-subsidiary directive, MTRL ). is a permanent establishment, a fixed place of business in a Member State through which the business of a company of another Member State is wholly or partly carried on, provided the benefits of this business situated in the Member State in which it is situated, under the double taxation agreement or - in the absence of such an agreement - tax under domestic law (Art. 2 para 1 MTRL ).