“Home office in Germany as permanent establishment?” – German tax authorities comment on the topic for the first time

The letter from the Federal Ministry of Finance dated 5 February 2024 – IV D 1 – S 0062/23/10003 :001, DOK 2023/1122582 revised the application decree for the German Fiscal Code (AEAO). Among other things, the tax authorities addressed the question of whether working from home in Germany can constitute a permanent establishment under national law.

The amendment to AEAO to Section 12 no. 4 reflects the view of the tax authorities that working from home in Germany by ordinary employees of companies not based in Germany does not usually lead to permanent establishment (and thus to limited tax liability).

• The reason for this is that a permanent establishment in the meaning of Section 12 AO requires the employer to have power of disposal over the premises.
  
• In the three special cases mentioned in AEAO to Section 12 no. 4 it is assumed that the employer does not have power of disposal over the premises. These are:
  
  • assumption of the costs for the home office and its equipment by the employer;
    
  • conclusion of a rental agreement for the employee's domestic premises between employer (tenant) and employee (landlord), unless the employer is actually authorised to use the rooms for other purposes in individual cases (e.g. through a right to send other employees to the rooms or a right to enter the rooms outside of work safety inspections);
    
  • cases in which no other workplace is made available to the employee by the provided to the employee by the employer.
    
• However, in exceptional cases the employer may have power of disposal, so this must still be checked.

Furthermore, this assumption is not applicable in the case of employees with management function. In this case, the relevant criteria for the disposal over the premises remain uncertain.