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New BFH ruling on domestic permanent establishments

For real estate investors who invest in German real estate with foreign companies, uncertainties regularly arise from the question whether service providers (e.g. asset or property managers) in Germany lead to a domestic permanent establishment and thus to a trade tax liability in Germany, e.g. for rental income and capital gains. Uncertainties had arisen in particular from a ruling by the Berlin-Brandenburg Fiscal Court (FG) in 2019, which had applied very strict standards.

In its recently published ruling of March 23, 2022, III R 35/20, the Federal Fiscal Court (Bundesfinanzhof, BFH) specified the requirements for the assumption of a domestic permanent establishment.