The German Federal Ministry of Finance on 5 February 2024 issued revised Administrative Principles on the General Tax Code (AEAO), including guidelines on the definitions and requirements for the establishment of a permanent establishment (PE).
According to the German guidance, the rules regarding home offices remain unchanged: working from a home office generally does not create a permanent establishment within the meaning of the OECD model tax convention.
This is also the case if the costs of the home office and its equipment are paid by the employer, or if there is a rent agreement between the employer and the employee, with the employer as a tenant for the home office premises, unless the employer has an effective right to use the premises for other purposes (for example, a right to assign other employees to the premises or a right to enter the premises other than for health and safety inspections). Usually, the employer does not have sufficient power of disposal over the employee's home office.
In cases where the employer does not provide the employee an alternative workplace, the employee’s home office is generally not considered a PE.
The situation may be different when an employee performs a management function for the employer and has power of attorney to act and represent the employer.
Ligiane Barnsteiner
BDO in Germany
According to the German guidance, the rules regarding home offices remain unchanged: working from a home office generally does not create a permanent establishment within the meaning of the OECD model tax convention.
This is also the case if the costs of the home office and its equipment are paid by the employer, or if there is a rent agreement between the employer and the employee, with the employer as a tenant for the home office premises, unless the employer has an effective right to use the premises for other purposes (for example, a right to assign other employees to the premises or a right to enter the premises other than for health and safety inspections). Usually, the employer does not have sufficient power of disposal over the employee's home office.
In cases where the employer does not provide the employee an alternative workplace, the employee’s home office is generally not considered a PE.
The situation may be different when an employee performs a management function for the employer and has power of attorney to act and represent the employer.
Ligiane Barnsteiner
BDO in Germany