Creation of a permanent establishment by outsourcing management responsibilities to a domestic management conpany

The Fiscal Court of Berlin-Brandenburg has ruled in its decision from November 2 st, 2019, that a corporation having its place of business management located outside of Germany can create a per- manent establishment in Germany, solely by providing a German tax resident property management company with extensive management responsibilities. Even if this ruling discusses the rare case of a corporation which has its registered seat domestically but its place of management abroad at the domicile of its managing director, the consequences of this ruling can be applied to cases, where entirely non-domestic companies hand over management responsibilities to German tax resident management companies. This ruling is especially relevant for common inbound real estate structures using non-domestic companies to hold interest in domestic real estate.

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