- The German Ministry of Finance released updated guidance on 5 February 2024 regarding the criteria for a permanent establishment (PE) under section 12 of the General Tax Code.
- The updated guidance states that a home office used for remote working generally should not qualify as a PE. Key aspects of the guidance include the requirement for a fixed place of business with a certain degree of permanency, the need for a valid legal position to use a particular place, and the creation of a PE at the business premises of a third party under certain conditions.
- The guidance also clarifies that the activities of an employee at their home office generally should not create a PE for the employer.
- It further explains the concept of a “management-PE” and applies the definition of a PE to self-employed individuals and those generating income from farming and forestry activities.
- The guidance emphasizes that the term “permanent establishment” is determined under German tax law, unless defined separately in an applicable double tax treaty.
- Overall, the updated guidance provides helpful clarity for taxpayers, particularly regarding the treatment of home offices as a PE.
Source Deloitte
