05.09.2022 Views

Coffee & Consulting: Cross-border commuter - The risk of permanent establishment

  • No tags were found...

You also want an ePaper? Increase the reach of your titles

YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.

COPYRIGHT © CONVINUS

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

Coffee & Consulting:

Cross-border commuter

The risk of permanent establishment


Permanent Establishment (PE) nationally / internationally

• Fixed base on national territory

• Exercise of a business or any other economic activity (acc. to Sect. 29 AT Federal Fiscal Code)

• Definition overlaps to a large extent with the international definition below

• E.g. Branches, CEO activity, home-office or construction for the duration of more than 6 months

• PE definition acc to Art. 5 OECD-MA:

• Fixed Establishment

• Existence of an Austrian-based business facility

• Duration

• Exercise of a business activity

• Power of disposal over business facility

• Agency PE

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

2


Permanent Establishment (PE) nationally / internationally

• Differentiation secondment and personnel lease:

Secondment:

• Service contract or an order

• Risk of establishing a PE

• In whose interest?

• E.g. secondment of a marketing strategist from the parent company to the subsidiary to implement the marketing

strategy at the subsidiary. If this is in the interest of the parent company then the parent company remains the

employer for treaty purposes

Personnel lease

The employee is leased to another company

• Integration in / bound by instructions of the hosting company

• Basically no risk of the establishment of a PE

• Withholding tax (in case of inbound personnel leasing)

• Relief at source only in case of

• Intra-group transfer of employees or

• Existence of an exemption notice (to be applied for at tax authority Bruck/Eisenstadt)

• In both cases prerequisite: wage tax deductions to ensure the taxation of employees assigned to Austria

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

3


Examples

• A consulting company based in Italy offers its services also in Austria. In Austria, always the same office is rented in 14-day

intervals. In between there is no disposal over the office in Austria.

• SOLUTION:

Fixed establishment

Over a long period of time (also recurring with interruptions)

Business activity

Power of disposal

• An AT company seconds an employee for the duration of 12 months to the Chinese group company so that he or she can train

employees in the operation of a machine. The costs for the training are charged based on the personnel costs plus 10% mark-up.

• SOLUTION:

• In whose interest?

• Parent for control and coordination PE risk

• Personnel lease basically no PE risk

• Service PE (in certain DTA)

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

4


Home-Office PEs – Qualification conflicts with GER and CH

AT

• Treats Home-Office as a PE for treaty purposes if the following conditions are met:

• Factual power of disposal independent of access authorization

• Not only temporary, more than (25% of the total activity)

• Serving for the exercise of the business

GER

• Home-Office does usually not constitute a PE

• No legal power of disposal over private apartments

• GER employer is granting Home-Office to an Austria-based employee risk of double-taxation

• AT employer is granting Home-Office to an German-based employee possibly double-non-taxation

CH (to be discussed in more detail with the experts from Convinus)

• Home-office PEs are known in Swiss tax law

• 12-months duration

• Ordering of Home-Office / costs for Home-Office are borne by employer

• PE risk higher the more the employer has influence on the Home-Office

• No highest court decisions up to now

Avoidance qualification conflicts by interpreting method article or mutual agreement procedure

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

5


Examples

IT-employee working for group-company in AT Home-Office

auxiliary activity acc. to Art 5 para. 4 OECD-MA

activity is rendered for the whole group

PE establishment in Austria tax obligations of the foreign employer

IT-employee working for a German company in the AT Home-

Office

- auxiliary activity acc. to Art 5 para. 4 OECD-MA

- No PE in Austria tax obligations in the employer state Germany

IT manager works in AT home office

generally not an auxiliary activity within the meaning of Art. 5 para. 4 OECD-

MA

Permanent establishment in Austria at the home office location is triggered

Declaration and tax obligations of the foreign employer in Austria

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

6


PE avoidance

• Preparatory and auxiliary activities (acc. to Art. 5 para. 4 OECD-MA) do not trigger any PE

• List of exceptions (may not represent the core activity of the company)

• Storage, display and delivery of goods, not orders, repairs and sales closure

• Stocks of goods exclusively for storage, display and delivery

• Stocks for processing and treatment

• Purchasing and information procurement exclusively for the company e.g. correspondence

office, market research

• Other auxiliary activities, e.g. advertising, information, research, representative and liaison

offices,

• Combination of different auxiliary activities

Exception: according to the legal opinion of the Austrian Ministry of Finance

PE establishment cannot be avoided when auxiliary or preparatory activities

for the whole group are performed

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

7


Conclusion

• Caution with cross-border activities of employees

• Establishment of a PE when using a fixed facility for business or professional purposes, power of

attorney to conclude contracts for the principal

• Avoidance PE in connection with auxiliary or preparatory activities (not if for the whole group)

• Profit deferral (according to transfer pricing principles)

• Additional compliance costs

• PE establishment not always disadvantageous (possible lower tax burden abroad)

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

8


Sample – Cross border employee

SITUATION

• Anton Austria (Austrian national) lives in Austria and is employed at Drinks AG in St. Gallen (Switzerland) as the CFO.

• He would like to still continue to work 3 days in the office and 2 days from home.

What are the legal implications?

Switzerland

• Labour law: Switzerland / Austria

• Immigration: Cross-border permit

• Social security: none in Switzerland, but A1 will

be required

• Tax: Swiss days will taxed in Switzerland

(withholding tax)

• Payroll: Switzerland with Shadow-Payroll in

Austria

Austria

• Labour law: Switzerland / Austria

• Social security: Austria, A1 form to be applied at

AT health insurance fund

• Tax: 100% of Swiss income taxable in AT, taxes

paid in CH to be credited

• Payroll: If a PE is created obligation to

withheld wage tax, no PE shadow payroll

recommended in order to calculate AT

soc.sec.contributions

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

9


Sample – Cross border employee

SITUATION

• Reto Swiss (Swiss national) lives in Switzerland and is employed at Drinks AG in Vienna (Austria) as the CFO.

• He would like to still continue to work 3 days in the office and 2 days from home.

What are the legal implications?

Switzerland

• Labour law: Switzerland / Austria

• Social security: in Switzerland enrolled, A1 to be

requested

• Tax: tax return procedure with effectively taxing the 2

days; the income taxed in Austria will be considered

with exemption by progression

• Payroll: Shadow-Payroll for Swiss social security

Austria

• Labour law: Switzerland / Austria

• Immigration: Application registration certificate

(“Anmeldebescheinigung”) within 4 months of

the entry in case of a domicile in AT, free access

to work

• Social security: Switzerland, A1 in AT

• Tax: Income attributable to working days in AT

taxable in AT, income attributable to working

days in CH tax-exempt in AT

• Payroll: In AT, income attributable to CH can be

considered tax exempt

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

10


Your Questions?

Michael Obernberger, MBA

Partner

ARTUS Steuerberatung

GmbH & Co KG

M.Obernberger@artus.at

+43 676 897089 200

Friederike V. Ruch

CEO

CONVINUS global mobility solutions

friederike.ruch@convinus.com

+41 44 250 20 20

C r o s s - b o r d e r c o m m u t e r - T h e r i s k o f p e r m a n e n t e s t a b l i s h m e n t , S e p t e m b e r 5 , 2 022

COPYRIGHT © CONVINUS

11


12


13


14


15


Disclaimer

The content of this presentation is for general guidance only

and should by no means be used as a substitute for an

individual consultation with professional accounting, tax, legal

or other competent advisers. While we have made every

attempt to ensure that the information delivered with this

presentation has been obtained from reliable sources,

CONVINUS is not responsible for any errors or omissions, or for

the results obtained from the use of this information. The

entire content of this webinar is the intellectual property of

CONVINUS and is under copyright. Any modification,

duplication, distribution and public disclosure of the content

or parts there of requires the written consent of CONVINUS.

COPYRIGHT © CONVINUS

16

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!