Founder in Germany, Foreign Company Abroad: Where Is the Company Actually Managed?
A foreign company does not become German-taxable simply because its founder moves to Germany. But if its actual ongoing management is carried out from Germany, the German tax analysis can change materially.
Reviewed 23 August 2026 · Analytical material, not individual legal or tax advice.
A founder moves to Germany. The company remains incorporated abroad. Its registered office may remain where it was, a foreign director may still be in place and the bank account may remain abroad.
But the founder now runs the business from Germany: approving payments, directing staff, deciding ordinary contracts and handling recurring commercial issues.
That does not automatically make the foreign company subject to unlimited German corporate tax. The founder's personal residence does not decide the company's tax position. But foreign incorporation does not necessarily end the German analysis either.
The practical question is factual before it becomes legal: where is the company's actual ongoing management carried out?
For an entity falling within a relevant §1 KStG category, German law uses two separate connecting factors for unlimited corporate-tax liability: Sitz and Geschäftsleitung. §10 AO defines Geschäftsleitung as the Mittelpunkt der geschäftlichen Oberleitung.
Foreign incorporation does not close the German analysis
Section 1(1) KStG applies to listed entities having Geschäftsleitung or Sitz in Germany. §11 AO defines Sitz by reference to the place determined by law, articles, statutes or similar constitutive documents. Geschäftsleitung is a separate connecting factor.
For a foreign legal form, German tax classification may first need to be established before the §1 KStG consequences are stated.
Foreign incorporation does not end the analysis. Founder residence does not decide it. The German tax question is whether a relevant statutory connecting factor is present on the facts.
What does Geschäftsleitung mean in practice?
The short formula in §10 AO is developed by fiscal-court jurisprudence. In BFH, 23 March 2022, III R 35/20, the Court restated that the management centre is connected with where the will relevant to management is formed and management measures of some importance are ordered.
The test is not reduced to occasional high-level strategy. The factual focus is where the ordinary business transactions and organisational measures belonging to ordinary administration — the company's Tagesgeschäfte — are actually performed.
The BFH distinguishes these activities from measures concerning the fundamental basis of the company, general business policy and unusual decisions of particular economic significance. Those extraordinary matters are not, by themselves, decisive for locating Geschäftsleitung under §10 AO.
The BMF guidance of 18 June 2026 follows the same distinction between laufende Geschäftsführung / Tagesgeschäft and außergewöhnliche Geschäfte.
Which facts matter?
There is no statutory scorecard for Geschäftsleitung. BFH III R 35/20 requires the circumstances of the particular business to be examined, including its nature, scale, structure and characteristics.
- Who makes recurring payment decisions?
- Who represents the company to banks and public authorities in ordinary business matters?
- Who decides whether ordinary contracts are concluded, changed or terminated?
- Who gives recurring instructions to staff?
- Who resolves day-to-day commercial issues?
- Who controls bookkeeping or tax-administration processes where those functions form part of management?
- Where are those acts actually performed?
These are indicators, not mechanical tests. Their weight depends on the business model and on who actually possesses and exercises the relevant authority.
authority → actual behaviour → location → functional significance
Board meetings abroad do not answer the question by themselves
“The board meets abroad” can be relevant. It is not necessarily conclusive.
A foreign board may genuinely exercise ongoing management. If it does, the operating evidence should support that reality. But if ordinary management decisions are already being made and implemented in Germany before a foreign board records or confirms them, the corporate record and the management reality may diverge.
Board minutes are evidence of governance. They do not substitute for the real management process.
What if management happens in more than one country?
Cross-border businesses are often managed from several locations. BFH III R 35/20 provides an important rule for that situation: where a corporation conducts management activities at several locations, those activities must be weighted according to their significance for the corporation in order to determine the place of management.
Pattern A
Germany: founder approves payments, directs staff, manages ordinary contracts and recurring commercial issues.
Abroad: quarterly board meetings and exceptional shareholder decisions.
Pattern B
Germany: founder acts mainly as shareholder, receives reports and participates in exceptional owner decisions.
Abroad: directors independently manage cash flow, staff, ordinary contracts and recurring commercial activity.
The point is not to count meetings, signatures or days. It is to identify which management functions matter for this particular company and where they are actually performed.
Can the founder's German home become the management location?
Potentially, yes. But two questions must be kept separate: ordinary home-office PE analysis under an applicable tax treaty, and German domestic place-of-management / Geschäftsleitungsbetriebsstätte analysis.
The June 2026 BMF guidance states that management functions performed from a home office can create a Geschäftsleitungsbetriebsstätte. For §10 AO, the relevant place can be the manager's private premises where management acts forming part of the company's Tagesgeschäft are actually carried out. The same guidance treats treaty home-office PE separately.
A founder working from a German home and a founder actually conducting the company's ongoing management from that home are not necessarily the same legal fact pattern.
A directly relevant German case
A rechtskräftig judgment of the Niedersächsisches Finanzgericht, 7 December 2023, 10 K 39/23 concerned a Hungarian Kft whose statutory seat remained in Hungary. The court found unlimited German corporate-tax liability after concluding that the centre of management was at the managing shareholder's German residence.
For the service business involved, the court examined the overall organisational and economic circumstances, including the actual provision of services, customer contact, billing and invoicing. The judgment is lower-court and fact-specific; it is an illustration, not a mechanical rule.
If Geschäftsleitung is in Germany, what follows?
Unlimited German corporate-tax liability
Under §1(1) KStG, an entity within the relevant statutory categories can be subject to unlimited German corporate-tax liability if it has Geschäftsleitung or Sitz in Germany. Section 1(2) extends that domestic unlimited liability to all income.
That does not mean every item of income is ultimately taxed in Germany without further analysis. Treaty provisions and other allocation, exemption or relief rules may affect the final result.
German domestic-law Betriebsstätte
§12 AO expressly lists the Stätte der Geschäftsleitung as a German domestic-law Betriebsstätte. A foreign company cannot dismiss this question solely because it has no German office lease.
This is a domestic-law proposition. Treaty PE remains a separate analysis.
Gewerbesteuer
§2 GewStG links German trade-tax nexus to a business being operated in Germany through a domestic Betriebsstätte and contains the relevant corporation rule.
A German management Betriebsstätte can therefore create a Gewerbesteuer issue. Nexus does not determine the final taxable base or allocate all income to Germany; further allocation or reduction rules may apply where domestic and foreign establishments coexist.
If a German management Betriebsstätte exists, the German trade-tax nexus and allocation of relevant trade income need to be examined separately.
Compliance
A changed German corporate-tax position may also require the company's registration, return-filing, accounting and related compliance position to be reviewed. Specific duties and deadlines depend on the entity and facts and require their own source check.
Domestic German tax liability and treaty residence are separate stages
A domestic §1 KStG conclusion does not automatically resolve the international position. Another jurisdiction may continue to regard the same entity as resident under its own law.
- Verify whether an applicable income-tax treaty exists.
- Read the actual residence provision.
- Determine whether the company is dual resident under the relevant domestic laws.
- Check whether the Multilateral Instrument modifies the treaty rule.
- Verify both states' positions, reservations, notifications and dates of effect.
- Only then state the treaty consequence.
Where MLI Article 4 validly modifies a Covered Tax Agreement, treaty residence of a dual-resident person other than an individual may become a competent-authority question. Under the baseline Article 4(1) wording, if the authorities do not reach agreement, treaty relief or exemption is unavailable except to the extent and in the manner they agree.
If no applicable income-tax treaty exists, there is no treaty tie-breaker to apply.
Domestic German tax liability first. Treaty residence second.
Management Location Evidence Matrix
A management-location review should reconstruct four layers before applying the legal tests.
Formal authority
Articles, board rules, powers of attorney, bank mandates and service agreements.
Actual authority
Who can genuinely decide, approve, instruct, commit or refuse?
Location
Where are the relevant management acts actually performed?
Functional weight
How important are those acts for the ordinary operation of this company?
The matrix is not a legal scoring formula. It organises evidence before the statutory and treaty tests are applied.
Change reality before documents
If the existing management model creates an unclear or unintended tax position, the answer is not to create documents saying management happens somewhere else.
- Reconstruct the actual management process.
- Determine a commercially and legally appropriate operating model.
- Change real powers, responsibilities and decision processes where justified.
- Implement those changes in practice.
- Document the governance model that actually exists.
- Obtain the necessary jurisdiction-specific tax and legal confirmation.
Foreign board meetings can form part of genuine governance. They cannot, by themselves, cure a management model that operates differently in practice.
Before relocation, there may be more scope to design responsibilities before the factual management pattern changes. After relocation, the first task is usually to reconstruct when functions moved, where decisions were made and which tax periods may require review.
The question is not simply where the company is registered
A founder's move to Germany does not, by itself, determine the tax position of a foreign entity. The analysis must distinguish personal residence, German tax classification, Sitz, Geschäftsleitung, domestic management Betriebsstätte, potential Gewerbesteuer consequences and any treaty or dual-residence overlay.
Where is the company's actual ongoing management carried out, and which German and treaty rules do those facts engage?
That question should be answered from the real management process, not from the corporate chart alone.
Selected primary sources
- Germany — Körperschaftsteuergesetz §1. Official text
- Germany — Abgabenordnung §§10–12. §10 AO · §11 AO · §12 AO
- Bundesfinanzhof — Urteil vom 23.03.2022, III R 35/20. Official decision
- Bundesfinanzhof — Urteil vom 20.12.2017, I R 98/15. Official decision
- Niedersächsisches Finanzgericht — Urteil vom 07.12.2023, 10 K 39/23; rechtskräftig. Official court summary
- German Federal Ministry of Finance — Betriebsstättenbegriff, letter of 18 June 2026, particularly Rn. 44, 143 and 145. Official guidance
- Germany — Gewerbesteuergesetz §2. Official text
- OECD — Multilateral Instrument, Article 4, where applicable to the actual Covered Tax Agreement. Official text
Technical note. This analysis is general and reflects the sources identified above as reviewed on 23 August 2026. German entity classification, domestic-law consequences, treaty application, MLI modifications, reservations and dates of effect must be checked for the entity, jurisdictions and facts involved in a particular matter. BFH III R 35/20 is used for its general §10/§12 AO propositions; Niedersächsisches FG 10 K 39/23 is a factually closer but lower-court illustration.
Founder living in Germany while the company remains abroad?
Map who actually manages the business, where recurring management acts are performed and whether the governance record matches the operating reality.
LEXONYX maps the facts, structure and cross-border dependencies. Jurisdiction-specific legal and tax conclusions are provided or confirmed by appropriately qualified specialists where required.