The Ministry of Finance has published an EAS ruling dealing with the question of whether the home office of an employee resident in Austria may constitute a permanent establishment for its German employer.
In the case at hand, a German company providing advisory services on clinical risk management entered into an employment agreement with an employee resident in Austria. The main tasks of the employee included conducting advisory projects on patient security and clinical risk management in hospitals and health institutions in Italy, Austria, Germany and Switzerland, the setting up and maintaining of quality and clinical risk management systems as well as giving trainings, seminars and lectures. In order to prepare these tasks the employee was given the possibility of using a home office at his main place of abode in Austria.
It was assumed that the German employer did not have a fixed place of business in Austria, that the Austrian employee did not have the power to conclude contracts on behalf of its employer and that he was merely provided with the working equipment necessary for him to perform the office work, e.g., mobile phone and personal computer. Activities performed in the home office were limited to project preparation, the creation of quotes using templates, the assessment of preventive measures, the development of individual solution strategies for the avoidance of patient injuries, as well as research activities and publications. Activities related to personal contacts with clients as well as trainings were performed either at the clients' facilities or at the employer's seat in Germany. The Austrian employee was free to decide the place to perform all preparatory tasks.
The question raised in this particular case was whether the German employer was subject to limited tax liability in Austria: If the home office of the employee qualified as a permanent establishment (PE) for the employer, then the profits attributable to such PE would be taxable in Austria.
In several cases, the Austrian Ministry of Finance and the Austrian Supreme Administrative Court (Verwaltungsgerichtshof ) have ruled that generally a PE can also be established at the private home of an employee. Para. 18 of the OECD Model Commentary 2017 on art. 5 of the OECD Model Tax Convention specifies that a home office of an individual employee may constitute a PE for the enterprise if such home office is at the disposal of the enterprise. Whether this is the case is subject to review in each individual case, as the assessment is mostly dependent on the facts. Therefore, in the case at hand, it had to be determined whether the tasks performed at the home office of the employee in Austria occur on a continuous basis during an extended period of time or just occasionally. According to para. 12 of the above mentioned OECD Model Commentary, if the home office is used merely in an intermittent or incidental manner and with interruptions, it is not likely to be regarded as a place of business at the disposal of the employer and therefore will not establish a PE for the enterprise of the employer.
The EAS further mentions that evidence against the existence of a PE may also be derived if the employee does not claim deductions related to business expenses of the home office or if the employer does not require the employee to provide the home office for the disposal of the employer.
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