KPMG Germany Webpage
Click on the above link to visit the KPMG Germany webpage on the Mondaq website
For disclaimer and copyright see end of this article.

On 24 November 1997, the Federal Ministry of Finance held a hearing in Berlin at which interested parties had an opportunity to voice their criticisms of the proposed official guidelines on the taxation of permanent establishments (see IStR 1998 Beihefter 1/98 p. 4). A detailed report on the proposed guidelines is found in German News no. 3/1997 (pp. 2 ff.).

In response, the representatives of the Federal Ministry of Finance indicated that their draft would be thoroughly revised. Release of the final version is therefore not expected before the autumn of 1998.

An article has since appeared in which the provisions of the proposed guidelines regarding the assets attributable to a permanent establishment are subjected to detailed critical analysis. The author focuses on the tax authorities' proposal to attribute income-producing assets purchased by a permanent establishment out of its own profits to the head office if the assets are insufficiently related to the functional purpose of the permanent establishment. Up till now, assets purchased out of the profits of a permanent establishment have remained part of its property and income they generate has constituted branch profits. The article's author is highly critical of the tax authorities' attempt to change this treatment (see Kaminski RIW 1997, 970).

Disclaimer and Copyright

This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. We in particular insist that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While our articles are carefully reviewed, we can accept no responsibility in the event of any inaccuracy or omission. Please note the date of each article and that subsequent related developments are not necessarily reported on in later articles. Any claims nevertheless raised on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Deutsche Treuhand-Gesellschaft AG (KPMG Germany). Distribution to third persons is prohibited without our express written consent in advance.