The draft sets out the factual and legal requirements for creating a PE under section 12 of the General Tax Code and explains how this aligns with the PE concept under treaty law, in accordance with Article 5 of the OECD Model Tax Convention.
The German Federal Ministry of Finance has released a draft of its revised guidelines on permanent establishments (PEs) in domestic and international tax law.
These guidelines are intended to replace the previous version issued in December 1999.
The draft sets out the factual and legal requirements for creating a PE under section 12 of the General Tax Code and explains how this aligns with the PE concept under treaty law, in accordance with Article 5 of the OECD Model Tax Convention. Key factors include spatial and temporal permanence, a fixed connection to the ground, and a minimum duration of six months.
The guidelines also address modern business arrangements such as home offices, desk-sharing, and social media influencers. They clarify the role of dependent representatives and include an “anti-fragmentation” rule to prevent companies from splitting operations to reduce tax liabilities.
Illustrative examples cover a wide range of sectors, from 3D-printing facilities to hotel ships, demonstrating how the rules apply in practice.
The draft aims to ensure consistent application of both double taxation treaties and national tax law.
