Investment through a permanent establishment

(permanent – dependent – representative)
Oftentimes, however, a stronger presence will be required
in Germany after a while so as to meet market demands and
increasing administrative requirements.

In many cases, fulflling
these requirements is only possible by establishing a fxed place
of business or facility in Germany that serves the business of the
enterprise. Typically, this leads to the formation of a permanent
establishment in Germany. There are no conditions under com-
pany law that permanent establishments would have to meet.
The only condition to be met is to inform the municipality, in
which the permanent establishment is opened, which in turn will
share this information with the local tax offce.

Establishing and
liquidating a permanent establishment is thus considerably eas-
ier than setting up or liquidating a company, which means that
setting up a permanent establishment may be proftable even
after a short period of engagement. Any German-source income
derived from a permanent establishment is qualifed as commer-
cial income and subject to non-resident tax liability in Germany.

The economic risk will
be assumed solely by the foreign head office because a perma-
nent establishment has no legal personality.