Shortly before Christmas 2016, the Federal Ministry of Finance issued the long-awaited administrative guidelines on the profit allocation for permanent establishments (profit allocation PE guidelines). The 186-page long guidelines intend to specify the application of the arm’s length principle for permanent establishments implemented into law in 2013 as Sec. 1(5) of the Foreign Tax Act (FTA). Furthermore, the guidelines comment on the regulations of the Permanent Establishments Profit Allocation Act (PEPAA) issued in this context in 2014 and applicable to business years commencing after December 31, 2014.