Define Permanent Establishment in Germany by Estonian OÜ

3 posts in this topic

Hi, I should first say I am planning to talk to a tax advisor about this but wondered if anyone here could please shed any light so I can be asking the right questions.  

I've been trying to better understand what qualifies as a Permanent Establishment for tax purposes in Germany. I'm from the UK and live and freelance in Berlin, but will soon be forming a limited company with a colleague who lives in UK, splitting shares 50/50. The company designs, manufactures and sells an audio hardware product across Europe and the world. The technical design work is mainly carried out by contractors in Bulgaria and the manufacturing and probably warehousing will also be in Eastern Europe. Meaning the only presence of the company here in Germany is me, one of the 2 founders, with the other staying based in London.

The Estonian OÜ looks appealing as you can leave all profits in the business at the end of the year without being taxed, which would be really helpful for a hardware startup that has to pay large sums for manufacturing. It also appears to have relatively hassle-free setup. I'm concerned that it would be considered a permanent establishment in Germany as one half of the founders is living here. 

My questions:
1) What actually qualifies as permanent establishment in Germany? I get if it is a sole founder living here then it is essentially a German company, but if it is only one founder here then what?
2) If it is a permanent establishment, does that mean 100% of the company profit is liable for taxation in Germany?

Thanks in advance.

 

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My understanding (I'm neither a tax advisor nor a lawyer) is that the location of the property determines where it is taxable. I've recently done some work for an advisor in Berlin, Michael von Arps-Aubert (https://arps-steuerberater.de/en/) who specialises in this sort of question. His English is quite good too.

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Thanks, I will try contact them. It seems like a very confusing area to me.

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