If the foreign head offce is a corporation, it is assessed under
non-resident tax liability for its permanent establishment
income arising in Germany. The same rules apply to a foreign
individual maintaining a permanent establishment in Germany.
When the foreign head offce is a partnership, the individuals
or corporations that are its partners are subject to non-resident
tax liability with regard to the German profts of the permanent
The profts generated by a non-resident corporation’s permanent
establishment are subject to a corporate income tax rate of 15%
plus trade tax (Gewerbesteuer) and solidarity surcharge.
The profts of permanent establishments owned by an indi-
vidual non-resident taxpayer must be taxed according to such
taxpayer’s personal income tax rate (disregarding a zero-bracket
amount) plus trade tax and solidarity surcharge.
The trade tax that is allocable to the German permanent establishment and
that has actually been paid may be considered for tax purposes
by providing for a trade tax credit (§ 35 EStG). Profits that are
generated by a permanent representative are not subject to
trade tax in general.