An overview by Flick Gocke Schaumburg, Taxand Germany
The recent surge in remote working has prompted changes in company working models, known in Germany as the ‘home office’. Tax authorities have clarified that for tax purposes, an employee’s home office activities generally do not establish a permanent establishment (PE) for the employer, provided the employer lacks sufficient power of disposal over the premises.
The German tax authorities have recently issued updated guidance to the German Fiscal Code aiming to improve clarity and explain the term “permanent establishment” in more detail. Due to the risk of creating PEs, companies are often reluctant to allow their employees to work from home in a cross-border context, and companies will likely remain reluctant as the tax consequences of remote working abroad will also need to be assessed under the tax law of the other state involved.
Dr. Christoph Klein and Yannick Barbu from our German firm, Flick Gocke Schaumburg provide an overview of this guidance and analyse the view of the tax authorities here.
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