Germany: Remuneration of non-resident directors

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Germany: Remuneration of non-resident directors

peitz.jpg

muscheites.jpg

Petra Peitz-Ziemann


Erik Muscheites

The finance ministry appears to have reconsidered its position on the taxation obligation of the remuneration paid to non-resident directors of German companies. Up to now, it has broadly taken the view that the individual was liable to German income tax on his receipt for work performed in Germany on company business, if he could be considered as part of the local company's organisation. The ministry has now redrafted its decree – though the text is not yet final – choosing a different expression to describe the foreign resident director's involvement with local management, integrated as opposed to bound in. Up to now, bound in was generally considered to exclude the foreign resident who held a directorship with the German company purely to enable him to supervise its activities, or to provide a back-up in the interests of keeping the company fully competent under company law in an emergency. The fear now is that the use of the term integrated without further definition may indicate a change in attitude to the effect that a directorship is a formal appointment subject to registration and the holder is therefore automatically part of local management by virtue of the office held.

Fortunately, the ministry's other main criterion continues to be the country in which the executive physically does the work. Thus a day spent abroad on German company business – whether in the director's home office, or in his office at group headquarters – will not generally be seen as a German taxable event, regardless of its relevance to an intra-group management charge. The same would also seem to apply to days spent in third countries, such as on a visit to a major export customer of the German subsidiary. This position follows, of course, from the dependent personal services clause in most of Germany's double tax treaties.

Petra Peitz-Ziemann (petra.peitz-ziemann@de.pwc.com)

Tel: +49 69 9585 6586

Erik Muscheites (erik.muscheites@de.pwc.com)

Tel: +49 69 9585 3628

PwC

Website: www.pwc.com

more across site & shared bottom lb ros

More from across our site

ITR’s data has highlighted the US firm’s ambition to become America’s ‘premier’ tax player via a concerted partner recruitment strategy
Jaap Zwaan’s arrival continues a recent streak of A&M Tax investing in the region; in other news, the US and Japan struck a deal that significantly lowered tariff rates
In a world where international tax concepts rely on human activity, Leonard Wagenaar poses existential questions about the future of such ideas when AI is ever-present
France v Axa provides a practical illustration of how the burden of proof is applied in TP matters under French law, ITR also heard
In an exclusive interview with ITR, Ian Gary calls for a central public CbCR database and bemoans the US’s lack of involvement in international tax transparency
Reckitt Benckiser is to divest its Essential Home business, which includes more than 70 brands, to private equity firm Advent International
In the first of a new series of weekly opinion pieces, ITR Editor Tom Baker reflects on the OECD’s attempts to sanitise the US’s brazen pillar two negotiations
The threat of 50% tariffs on Brazilian goods coincides with new Brazilian legal powers to adopt retaliatory economic measures, local experts tell ITR
The country’s chancellor appears to have backtracked from previous pillar two scepticism; in other news, Donald Trump threatened Russia with 100% tariffs
In its latest G20 update, the OECD also revealed tense discussions with the US where the ‘significant threat’ of Section 899 was highlighted
Gift this article