de en
Nexia Ebner Stolz

Tax Advice

Tax consequences of working from home for the managing director

If, as a result of travel restrictions, the managing director of a foreign company now manages the business of the company from his place of residence in Germany, this could have an impact on the company's tax residence and thus tax liability.

Accor­ding to Ger­man tax law, a cor­po­ra­tion is sub­ject to unli­mi­ted cor­po­ra­tion tax in Ger­many if it has its regis­te­red office or its place of mana­ge­ment here. If the sole mana­ging direc­tor of a for­eign cor­po­ra­tion is for­ced to work from his or her place of resi­dence in Ger­many due to the Corona pan­de­mic, this could estab­lish unli­mi­ted tax lia­bi­lity in Ger­many. The cor­po­ra­tion would then be faced with dou­ble taxa­tion in Ger­many and in the coun­try where the com­pany is estab­lis­hed. In Ger­many, the tax regi­s­t­ra­tion of a per­ma­nent estab­lish­ment and the sub­mis­sion of a tax return with attri­bu­tion of pro­fits to this per­ma­nent estab­lish­ment would be requi­red. A dou­ble tax treaty agreed bet­ween the coun­try where the com­pany is estab­lis­hed and Ger­many does not pre­vent this, but only ensu­res that the same tax sub­st­rate is not taxed mul­tiple times. In addi­tion, deba­tes about the extent of the pro­fit to be allo­ca­ted to the per­ma­nent estab­lish­ment may arise.

At an inter­na­tio­nal level, howe­ver, first voices are already being heard advo­ca­ting that a pro­fes­sio­nal acti­vity at the com­pany’s head­quar­ters which is limi­ted or tem­pora­rily impos­si­ble due to the Corona pan­de­mic should not be detri­men­tal to tax resi­dency and thus tax lia­bi­lity.

For example, the OECD has already expres­sed the view that the tem­porary pro­fes­sio­nal acti­vity from the place of resi­dence should be irre­le­vant to the ques­tion of the exis­tence of a taxable per­ma­nent estab­lish­ment. Ire­land, Great Bri­tain and Aus­tra­lia also do not want to draw any tax con­se­qu­en­ces from the fact that mana­gers of mul­ti­na­tio­nal com­pa­nies are tem­pora­rily unable to work at the com­pany's head­quar­ters.


In Ger­many, there curr­ently only exist efforts to avoid tax con­se­qu­en­ces for cross-bor­der emp­loyees who tem­pora­rily work from home ins­tead of their usual place of work (see the arti­cle on cross-bor­der wor­kers). We howe­ver expect that this also app­lies to mana­ging direc­tors tem­pora­rily wor­king from home. Nevert­he­less, it should be ensu­red that the pro­fes­sio­nal acti­vi­ties of a mana­ging direc­tor wor­king from home do not become ent­ren­ched, as other­wise - even wit­hout pan­de­mic effects - the path to a per­ma­nent estab­lish­ment in Ger­many is a short one.  

back to top