Permanent Establishments
Your company is working abroad on customer projects or orders over a longer period of time, you are setting up a branch there or you have managing directors or senior employees with increased home office work abroad? Then caution is advised because your company can establish a permanent establishment in the respective country as a result.
The establishment of a permanent establishment leads to tax registration obligations and additional administrative work abroad. Furthermore, it has the consequence that both Germany and the foreign country tax the portion of the profit attributable to this permanent establishment. The countries involved regularly attempt to eliminate this double taxation. However, this is not so easy to do: in many cases, the term 'permanent establishment' is interpreted differently from country to country. In addition, the individual states have different systems for determining the respective operating results. As a result, these regulations often do not achieve the desired result and the underlying foreign activity therefore often becomes uneconomical.
In addition, the issue of permanent establishments is increasingly becoming the focus of tax audits. For this reason, various reporting requirements must be observed. Furthermore, since there is an international tendency to further lower the hurdles for the existence of a permanent establishment, an ongoing analysis of the respective foreign engagement is essential.
Experience shows that the only way to get a grip on this topic is to set up processes in the company in such a way that tax expertise is incorporated into the planning of a temporary foreign engagement at an early stage. To ensure a coordinated and largely harmonised result in all countries concerned, the relevant facts must also be viewed from the perspective of the foreign country in question. We would be happy to support you in these challenging tasks with consulting services tailored to your individual needs.
Our services at a glance
- Development of a process tailored to your company for the prompt identification and targeted management of issues related to possible permanent establishments
- Development of a system for determining the results of existing permanent establishments
- Support in the creation of permanent establishment documentation that complies with the legal requirements
- Strengths and weaknesses analysis of the existing permanent establishment documentation and the existing systematics for determining the profit of a permanent establishment
- Clarification of qualification conflicts with domestic and foreign tax authorities
- Conducting workshops to qualify and sensitise your employees
- Coordination/consultation with your advisors/colleagues abroad or with our international colleagues