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Where Taxpayers and Advisers Meet

Ltd Company tax obligations outside UK

Posts: 1
Joined: Fri Mar 16, 2018 2:12 pm

Ltd Company tax obligations outside UK

Postby BillK01 » Fri Mar 16, 2018 2:37 pm

Tax liability as Company
I am the director/employee of aa UK ltd company together with my spouse as equal partners. I have secured a contract with a Russian entity, that requires that i am providing services based in Germany. I invoice the Russian client directly. I wish to understand my tax obligations/hierarchy of DTT's and German tax liability.
1. Is my Limited company liable for corporate tax in Germany.
2.Should i create a permanent establishment (PE) in Germany as an employee of the UK ltd company (i.e. a subsidiary). Do i become a permanent representative of this PE. Then profit generated by the PE ( which is an offshoot of the UK ltd) becomes liable for corporate tax in Germany.
3.The subject of PE according to German Fiscal Code(AO), section 12, and permanent representative. section 13 would become appropriate under the consideration of 2 above.
4. According to DTT business profits are generally taxable in the state where the company is resident (in this case UK), unless a PE in the meaning of Art 5 of DTT is given in the other state (i,e, Germany). However, i believe the term PE is the meaning of Art 5 deviates from the PE in the meaning of sect 12 of German Fiscal code.
Tax Liability as an Individual
1.In case of double residency Art 4 para 2a of the DTT UK-Germany states that the individual shall be deemed to be a resident only of the contracting state with which his personal and economic relations are closer. This would be UK, since i have a home, and family there.
2. However Art.14 of the DTT, income from employment exercised in Germany is generally taxable in Germany

Essentially i would like to know
1. Can I still maintain my Ltd UK company and pay all my taxes in UK. Despite receiving no income directly from within Germany, or must i set up a PE as an extension to my UK tld Co.
2.Must i pay tax on income i receive via my UK ltd in Germany.
3. What is the best option in terms of tax optimisation


Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: Ltd Company tax obligations outside UK

Postby GlobalTaxAdviser » Wed Mar 21, 2018 12:22 am

Hi Bill

A UK Resident company is liable for Corporation Tax on its world wide profit. Germany may want to tax the profits if the UK company is being managed from Germany.

There maybe a case of double tax and the tie breaker will determine which country has primary taxing rights

If you are going to be based in Germany long term the maybe setup a company there instead.

To prevent Germany having tax rights then suggest you hold all board meetings in UK even though there maybe only one or two directors on board. You can also appoint a UK director.

Kind Regards


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