Home Office After Founder Relocation: When Does PE Risk Actually Arise?
A German home is a factual location. Permanent establishment is a legal conclusion. The analysis starts with what the person actually does there — not with the label “home office”.
Reviewed 23 August 2026 · Analytical material, not individual legal or tax advice.
A founder moves to Germany and continues working from home for a company incorporated abroad. There is no German office lease, registered branch or change to the corporate chart.
It is tempting to reduce the issue to one of two rules: “home office creates a permanent establishment” or “a private home can never be a permanent establishment”. Neither shortcut is reliable.
Start by separating four factual profiles: working, managing, selling and contracting from home. They can overlap, but they do not necessarily engage the same PE route.
Working
Can the home become a fixed place of business of the enterprise?
Managing
Is ongoing management / Tagesgeschäft actually carried out from the home?
Selling
Does customer-facing activity support fixed-place or representative/agent analysis?
Contracting
Does the actual treaty’s habitual contract or principal-role wording apply?
Operational reality before PE classification
The four function profiles are an overlay on the underlying LEXONYX Home-Office PE review sequence. The review does not jump from an address to a conclusion.
- Home Office — identify the place, person and actual use.
- Business Connection — establish how the location connects to the enterprise.
- Regularity — map frequency, duration and working pattern.
- Commercial Reason — determine whether the individual’s physical presence in that jurisdiction facilitates the enterprise’s business.
- Availability to Enterprise — test legal and practical access or disposal where relevant.
- Functions Performed — classify working, managing, selling and contracting activity.
- Materiality — assess the significance of those functions to the business.
- Domestic Law Review — test the domestic nexus rules first, including §§12–13 AO for Germany.
- Treaty Review — where an applicable treaty exists, determine whether its actual Article 5 wording limits Germany’s taxing right and identify relevant exceptions or bilateral modifications.
- Preliminary Conclusion — classify the issue as likely, possible, unlikely, further analysis required or local validation required.
Method note. This is an evidence-and-review workflow, not a statement that a treaty creates domestic taxing rights. The final legal analysis keeps domestic nexus and treaty limitation as separate layers.
Keep German domestic nexus and treaty protection separate
For Germany, the domestic analysis may include a Betriebsstätte under §12 AO or a ständiger Vertreter under §13 AO.
Section 12 AO expressly lists the Stätte der Geschäftsleitung among Betriebsstätten. Under §13 Satz 1 AO, a ständiger Vertreter is a person who sustainably conducts the enterprise’s business while being subject to its Sachweisungen. §13 Satz 2 AO then lists examples, including sustained contract conclusion or brokering and obtaining orders.
Those domestic concepts are not identical to treaty Article 5. German domestic law is tested first. Where an applicable income-tax treaty exists, its actual text must then be tested separately to determine whether Germany’s taxing right is limited.
German domestic Betriebsstätte or ständiger Vertreter is not automatically the same question as treaty permanent establishment.
Ordinary home work does not automatically create a PE
The OECD 2025 Update gives detailed guidance for cross-border work from a home. Its starting proposition is cautious: carrying on enterprise-related activity from home should not automatically make the home a place of business of the enterprise.
Relevant questions include permanence, working-time pattern, the activity actually performed, whether actual conduct matches formal remote-work arrangements, and whether the enterprise has a commercial reason for the activity to be undertaken in Germany.
For German domestic fixed-place analysis, BFH I R 47/20 restates that §12 sentence 1 AO requires a fixed business facility with sufficient permanence, serving the enterprise, over which the taxpayer has non-temporary disposal — a factual “rooting” of the business at the place.
One caveat matters for founder-led structures: OECD Commentary paragraph 44.20 says different considerations arise where the individual is the only or primary person conducting the enterprise’s business. Ordinary employee examples should not be transferred mechanically to that operating model.
50% is not a PE switch
OECD Commentary paragraph 44.8 indicates that, in the ordinary cross-border working fact pattern, using the home for less than 50% of total working time for the enterprise over the course of any twelve-month period commencing or ending in the fiscal year concerned will generally point away from the home being a place of business of the enterprise. Under paragraph 44.9, working time is determined by the individual’s actual conduct; formal contractual arrangements and policies assist only to the extent that they correspond with that conduct.
For Germany’s administrative approach to treaty home-office PE analysis, BMF guidance of 18 June 2026 states in Rn. 145 that OECD Commentary paragraphs 44.1–44.21 are to be observed at the time of application and similarly treats use below 50% as generally pointing away from an employer-attributable treaty PE.
50% or more does not create a presumption of PE. Paragraph 44.10 requires the place-of-business question to be determined from the facts and circumstances.
The 50% formulation is OECD Commentary guidance, not a universal statutory safe harbour and not a rule written identically into every bilateral treaty. The actual treaty and relevant jurisdictional position still need to be checked.
The correct shorthand is not 49% = no PE / 50% = PE. It is: below 50% generally points away in the ordinary fact pattern; at 50% or more, continue the analysis.
Why does Germany matter to the business?
Where the analysis continues, OECD Commentary identifies a prominent consideration: whether there is a commercial reason for the activities to be undertaken in the state where the home is located.
The question is not whether German home work is convenient for the individual. Relevant facts can include meaningful interaction with customers, suppliers, associated enterprises, business partners or personnel where physical presence in Germany facilitates the enterprise’s business.
The Commentary also draws boundaries. Incidental customer contact is not enough by itself. Permitting remote work solely to obtain or retain the individual’s services does not, on that fact alone, supply the relevant commercial reason. Simple office-cost saving also does not automatically establish a commercial reason for conducting the business in Germany.
Commercial reason is important. It is not a standalone universal test replacing the rest of Article 5.
Management from home is a different German fact pattern
For an ordinary employee home office, BMF Rn. 140–141 states that the employer typically lacks sufficient Verfügungsmacht over the private premises for the ordinary §12 AO fixed-place branch. Employer payment of costs or equipment, a lease of the room, or lack of another workplace will generally not, by themselves, establish sufficient disposal.
But BMF Rn. 143 states that management functions performed from a home can create a Geschäftsleitungsbetriebsstätte. For that domestic branch, ordinary fixed-facility / Verfügungsmacht analysis does not operate in the same way; the focus is where management acts forming part of the company’s Tagesgeschäft are actually carried out.
A founder working from home and a founder actually managing the company from home are not necessarily the same PE fact pattern.
The treaty layer remains separate. For treaty purposes, BMF Rn. 145 states that the 50% home-office framework also applies to employees performing management functions. This does not eliminate the separate domestic Geschäftsleitungsbetriebsstätte analysis, and a domestic Geschäftsleitungsbetriebsstätte should not be presented as automatically establishing treaty PE under every DTT.
Sales activity can open a second PE route
Developing customers, attending meetings, preparing proposals or negotiating commercial terms can matter to the fixed-place analysis, including the commercial-reason inquiry. The same facts can also require a separate domestic representative or treaty dependent-agent analysis.
Do not merge the two. A person can perform substantial sales activity without the home necessarily satisfying a fixed-place test, and a fixed place can exist without satisfying treaty dependent-agent conditions.
“Negotiates from Germany” is not itself a PE conclusion.
OECD Commentary treats mere attendance at or participation in negotiations as insufficient, by itself, to establish habitual contract conclusion or the broader principal-role condition. Negotiations can still be evidence of what the person actually does.
Start with the actual treaty — especially in Germany
The post-BEPS / 2017 OECD Model version of dependent-agent PE includes habitual conclusion of relevant contracts and, in the broader formulation, habitually playing the principal role leading to contracts routinely concluded without material modification.
For Germany, however, there is a critical qualification. Germany’s deposited MLI position reserves, under Article 12(4), the right for the entirety of MLI Article 12 not to apply to Germany’s Covered Tax Agreements.
MLI Article 12 does not itself introduce the broader principal-role rule into Germany’s CTAs. A Germany case must start with the actual bilateral DTT and any bilateral protocol or amendment.
Useful factual questions include who identifies the customer, sets price, negotiates material terms, obtains commercial commitment, has formal signature authority and whether approval elsewhere is substantive or merely routine.
A fixed place does not always finish the Article 5 analysis
If the applicable treaty contains relevant Article 5(4) exceptions, activities limited to a preparatory or auxiliary character may still fall outside PE status, subject to the precise treaty wording and any applicable anti-fragmentation rule.
Germany’s 2026 BMF guidance preserves this step for home-office cases and states that activities concerning company management will generally not be treated as preparatory or auxiliary.
The sequence is: place → enterprise nexus → activity → treaty exception.
Do not apply “OECD 50%” globally
The 2025 Update materially improves the home-office framework, but the OECD’s published state positions show that it is not accepted identically everywhere. For example, Israel records a position on measurement of the 50% threshold, while India and Nigeria disagree with parts of the new approach.
The operational rule is simple: check the actual treaty, the jurisdictions involved, relevant state positions and domestic practice before applying the Commentary framework.
Build the evidence file around questions, not documents
Working pattern
Where work actually occurs, time by country, changes during the year, and whether formal arrangements match actual conduct.
Commercial geography
Customers, suppliers and personnel interacted with from Germany and why German physical presence matters, if it does.
Management
Who carries out ordinary management, which acts occur in Germany, and their frequency and significance.
Contracts & premises
Who originates, negotiates, approves and signs; plus what legal or practical rights the enterprise has over the home space.
Documents are evidence of operational reality; they do not manufacture that reality.
Before relocation and after relocation are different projects
Before a move: map what will actually move with the person — ordinary work, management, customer activity, contract authority and the commercial geography of the business.
After a move: reconstruct when the working pattern began, what functions were actually performed in Germany, which decisions and contracts occurred there, whether management moved in practice and which periods may be affected.
Do not design documents first and facts second.
Four functions, four analytical starting points
Working
Primary: fixed place of business.
Then: permanence, working time, commercial reason, Article 5(4).
Managing
Primary: ongoing management / Tagesgeschäft.
Then: §10 AO + §12 AO, separate treaty test, corporate-tax layer.
Selling
Primary: fixed-place and representative/agent branches.
Then: customer interaction, §13 AO and actual treaty wording.
Contracting
Primary: actual treaty’s habitual-contract / principal-role test, if present.
Then: bilateral DTT/protocol; Germany’s MLI Article 12 reservation.
The matrix is not a substitute for the treaty. It prevents four materially different factual patterns from being compressed into one question: “Does home office create a PE?”
Which function from Germany can engage which PE route?
The useful question is not simply whether someone can work from home in Germany “without creating a PE”. A founder’s home can be irrelevant to one test and highly relevant to another. Working-time percentage can matter without being decisive. Sales activity can matter without automatically creating an agent PE.
Map the functions first. Apply domestic law second. Overlay the actual treaty third. Then decide what the facts mean for the structure.
Selected sources
- Germany — Abgabenordnung §12. Official text
- Germany — Abgabenordnung §13. Official text
- BFH — Urteil vom 07.06.2023, I R 47/20 — general fixed-place / Verfügungsmacht principles in the services context. Official decision
- BMF — Betriebsstättenbegriff, Schreiben vom 18.06.2026, particularly Rn. 140–146. Official guidance
- OECD — The 2025 Update to the OECD Model Tax Convention, Article 5 Commentary changes. Official publication
- OECD — Germany MLI Position deposited 18 December 2020, Article 12 reservation. Official position
Technical note. This analysis is general and reflects the sources identified above as reviewed on 23 August 2026. Domestic-law conclusions, treaty wording, bilateral amendments, state positions and dates of effect must be checked for the jurisdictions, enterprise and facts involved in a particular matter.
Planning to work or manage a foreign business from Germany?
Map the functions performed from Germany before assuming that “home office” is either harmless or automatically a permanent establishment.
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.