Yes, provided due regard is had to personal income tax obligations and to the rules for claiming employment costs as expense deductions in both countries.
Fundamentally, income from employment is charged to income tax in the country where the work is performed. Germany's double tax treaties all provide that if a non-resident employee is not physically present in Germany for 183 days in any one year, his employment income will not be taxable in Germany if a German entity neither pays nor bears the cost of the salary. On the other hand, the original employer abroad will often need to make an appropriate charge to the German subsidiary or permanent establishment in respect of services performed in Germany by assignees, in order to avoid tax-disallowance of the costs at home on the grounds that the expense were incurred on behalf of another business.
In some cases, employees are assigned to Germany, but continue to fulfil functions on behalf of the parent company or of the group. Essentially, they have two jobs and are located in Germany for reasons of mutual convenience only. In such cases, it will be necessary to ensure that each entity bears an appropriate part of the overall cost of employment, whilst at the same time ensuring that each entity fulfils its obligations for the correct deduction of withholding taxes (and of social security contributions) as an employer. A dual-employment relationship, sometimes referred to as "split-payroll", is often found to be the easiest solution in practice, as long as the duties performed by the employee for each employer do not significantly fluctuate from month to month.
Further details of the official German view on the cost allocation principles to be followed by related parties may be found in the "Other Resources" section of the PwC Germany Business Portal available through www.pwc.de. under the heading "Staff Secondment Decree".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.