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A locker is a permanent establishment in Germany

Not just a locker

Key points

  • A UK engineer working in Germany was provided a locker for his use.
  • The Federal Fiscal Court ruled that the locker was a permanent establishment (PE) of the engineer.
  • This ruling is likely to establish PE for employees.
  • Foreign employers must withhold income tax if they have a PE in Germany.
  • Why did the engineer’s apartment in Germany not constitute a management PE?

The trend in German fiscal court rulings to lower the threshold for the taxability of foreign companies in Germany is becoming more firmly established. In particular the establishment of a permanent establishment in Germany is now being accelerated after a number of rulings by the Bundesfinanzhof (Federal Fiscal Court) (BFH). This article analyses the court’s most recent ruling on permanent establishments (PE) – based on the double tax treaty with the UK.

The BFH decision is based on a judgment that at first...

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