Germany’s tax treaties typically provide
Germany’s tax treaties typically provide that the income and the
assets of a permanent establishment may be taxed in the country
in which the permanent establishment is located.
Hence, foreign investors are subject to tax in Germany with respect to their Ger-
man-source income attributable to a permanent establishment.
The investor’s tax status is relevant for determining the level
of taxation of the income attributable to the permanent estab-
If the investor is a corporation (from a German tax
perspective), the investor is subject to corporate income tax and
to the solidarity surcharge. If the investor is an individual, the in-
vestor is subject to income tax and to the solidarity surcharge. If
a partnership owns the permanent establishment, the profts are
allocated to the partners in proportion to their respective owner-
ship interests and taxed at the level of the partners. Partners are
accordingly liable to personal or corporate income taxes and to
the solidarity surcharge.
A domestic permanent establishment earning commercial busi-
ness income is subject to trade tax.