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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).
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