Permanent Establishment in Germany

Permanent establishments are additional branches of the enterprise as a whole, which are set up as business premises but are dependent upon the head office abroad. Therefore, they do not constitute independent branches, and as such are not permitted to trade under any name other than that of the head office. The permanent establishment performs auxiliary dealings that serve the purpose of the preparation, brokerage or execution of the foreign enterprise´s main dealings.

• Manufacturing sites, with no sales,
• Points of storage, receipt and shipping,
• Mere points of brokerage,
• Sales points without their own purchasing.

Dependent offices are not entered in the Commercial Register. However, each site must be registered in the Business Register.

When foreign investors have to meet market and increasing administrative requirements in Germany the demand for a stronger presence of the enterprise in Germany will often increase as well. In many cases, establishing a fixed place of business or a facility represents the only way to support investors in meeting these requirements and to serve the business operations in Germany. Typically, this would be addressed by the formation of a permanent establishment in Germany.

A second benefit to mention is that both the setting up and the liquidating of a permanent establishment is easier and therefore more flexible than incorporating or liquidating a regular legal entity in Germany. Due to this fact a permanent establishment may already be profitable even though a foreign investor only wants to enter into a short period of business engagement in Germany.

At some point in time a representative in Germany might become necessary instead of a fixed place of business or facility to successfully continue the business operations of a foreign enterprise . In many cases the incorporation of a new business is also required to support the business growth strategy in Europe.

Consultinghouse can help foreign investors to evaluate an individual business model and will provide guidance to identify and establish the right investment option in order to successfully touch ground in Germany and Europe. Consultinghouse does not provide legal- or tax advice.