May profits earned by a “permanent establishment” of a German company in the UAE be transferred tax-free to Germany?
As far as the German tax law releases the profits earned in the UAE from German taxation and the UAE does not enforce its taxation laws, the profits earned in the UAE remain tax-free and are considered so-called “white earnings.” However, this applies only under the condition that the permanent business establishment located in the UAE is active according to the definitions of the DTA and the German International Taxation Law (AstG). If these conditions have not been met, the so-called credit or offset method applies. When crediting the taxes levied by UAE, the total tax burden of the revenues earned in the UAE depend on the German tax burden. Crediting or offsetting does thus not offer any real tax advantages since the tax burden to be credited amounts to 0%. The conclusion is that if the conditions mentioned above are met, profits of a permanent business establishment of a German company located in the UAE are basically released from German taxation and thus remain tax-free. Based on
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