In its decision of February 23rd, 2022, III R 35/20, the German Federal Fiscal Court had to deal with the question of whether and under which circumstances the premises of a subcontractor could be considered to be at the disposal of a general contractor and thus constitute a permanent establishment (PE) of the general contractor under German tax law for trade tax purposes. Contrary to the judgment of the Fiscal Court Berlin-Brandenburg of November 21st, 2019, 9 K 11108/17, assuming a general contractor’s PE in the source state because of a close economic relationship between the general contractor and its subcontractor, the German Federal Fiscal Court repealed the lower court’s decision. Since jurisdiction and administrative practice both in Germany and Austria attach a similar meaning to the term “fixed place of business" as used in paragraph 12 of the German as well as paragraph 29 of the Austrian Federal Fiscal Code in a very similar wording and Article 5 OECD Model, the court’s decision setting limits to an exaggerated interpretation of the meaning of a “fixed place of business" for tax purposes is of practical relevance when general contractors employ subcontractors doing business in the source state. Stefan Bendlinger analyzes possible income tax implications resulting from the German court’s decision.
