Permanent establishment: trade registration is not tax law

German trade law and tax law both use the word Betriebsstätte – but they mean different things. If you register your trade at our business address, that is your business seat under trade law. Whether it is also a permanent establishment for tax purposes is decided by the tax office under its own rules.

Trade law: the address in the registration

The trade notification under § 14 GewO is regulatory law. It tells the authority who runs which business where and where it can be reached. The trade office does not examine tax questions.

Tax law: what § 12 AO requires

Under § 12 AO a permanent establishment is any fixed place of business or installation serving the business. The Federal Fiscal Court (most recently BFH, 23 March 2022, III R 35/20) requires:

• a fixed facility linked to a specific place and of some duration,
• the business’s own activity actually carried out there,
• more than temporary control – a legal position that cannot easily be taken away.

A mere factual possibility of use or shared use of someone else’s premises is not enough. Working for years at a client’s premises does not by itself create a permanent establishment there.

Why our coworking space does not create one

For a business address to count as a permanent establishment for tax, you usually need a room or fixed workplace that is permanently and legally secured for you – typically your own office rented only to you, where you actually work. At our address we offer a coworking space: desks are shared and used flexibly, there is no room assigned to you alone. The required control is missing, so registering your trade with us generally does not create a permanent establishment under § 12 AO.

Consequences

• Trade tax: only due if a permanent establishment is maintained in Germany (§ 2(1) GewStG).
• Income tax: without residence or habitual abode in Germany, business income is only subject to limited tax liability if there is a permanent establishment or permanent representative here (§ 49(1) no. 2(a) EStG). The double taxation treaty with your home country also decides where profits are taxed.
• Watch out for habitual abode: staying in Germany for more than six continuous months – e.g. as a live-in carer – can make you fully taxable here. Different rules then apply.
• VAT: you remain a business; with residence abroad the central tax office for your country is responsible.

Our advice

Whether and where you pay income tax depends on your situation: residence, length of stay, type of activity and the tax treaty. Have it checked by a tax adviser. See also our article on false self-employment.