A recent decision by a German tax court has redefined the tax landscape for companies with German headquarters and globally mobile employees. The ruling confirms that for tax purposes, a German-headquartered company—not its foreign branches—is considered the legal employer. This has immediate implications for short-term travel and business visits into Germany.
Short Trips, Big Implications
Under the new interpretation, employees working abroad for foreign branches (e.g., in France, the U.S., or Singapore) may still be subject to German wage tax for any days worked in Germany. This holds true even if their stay is brief and falls under the familiar 183-day threshold that typically protects short-term assignments from host-country taxation.
In other words, the 183-day exemption rule may no longer provide a shield if the parent entity is German. A single meeting or short project in-country could now trigger German wage tax withholding obligations.
Increased Oversight Required
The court’s interpretation raises the bar for compliance, requiring companies to more closely track business travel into Germany and coordinate tax and payroll responsibilities accordingly.
In some cases, a flat 30% tax rate may apply to short visits of up to 18 consecutive working days, but this option still demands advance setup and proper documentation.
What Companies Should Do Now
Global mobility and tax leaders should begin by asking:
- Which employees report into German entities but are based elsewhere?
- Are we tracking cross-border travel into Germany, especially short visits, accurately?
- Are payroll, tax, and mobility teams aligned on how to handle this?
- Do our travel, short-term assignment, or commuter policies need updating?
Consult Tax Advisers Promptly
It’s critical to work with your tax advisers to understand how this ruling may affect cost-sharing arrangements, payroll withholding, and potential permanent establishment risks. Employees and business leaders should also be briefed on the implications for future travel plans.
The Takeaway
With the lines of tax liability redrawn, organizations need to review their business travel protocols and global mobility policies, especially when it comes to Germany-bound travel. A proactive approach can help avoid compliance missteps and manage exposure in a rapidly evolving tax environment.