• Search Results
  • Audit
    • Tax
    • Advisory

    Monday 27 May 2019

    The managing director of a company as a permanent representative from a German perspective

    Managing director as representativeThe question of whether a managing director, as an officer of a company, may be a permanent representative under S13 of the German Tax Code (abgabenordnung), so that a share of the profits may be taxable in the state in which the company is operating, has been controversially disputed.

    In its judgment on 23 October 2018 (Case No. I R 54/16), the Federal Tax Court ruled that in tax law, persons who are officers of the company from a civil law point of view may also be regarded as permanent representatives.

    In this specific case, the Federal Tax Court points out that the managing director of a Luxembourg corporation who regularly carries out business activities for the company in Germany may be regarded as a permanent representative. Thus, the company would be subject to limited corporate income tax liability without the existence of a domestic permanent establishment being relevant.

    Note: The case will be remanded to the Rhineland-Palatinate Tax Court, which must now clarify whether the sustainability of the business transactions by the managing director required for the acceptance of a permanent representative is met. If this is the case and the provisions of the Luxembourg DTA do not limit German access to taxation, the Rhineland-Palatinate Tax Court will have to further clarify how Germany's taxable share of profits is to be determined.

    Contributor:
    Christian Zimmermann - Director
    Ebner Stolz, Germany
    E: Christian.Zimmermann@ebnerstolz.de
     

    The question of whether a managing director, as an officer of a company, may be a permanent representative under S13 of the German Tax Code (abgabenordnung), so that a share of the profits may be taxable in the state in which the company is operating, has been controversially disputed.
    Back to top