The situation
A contract for a ten-month construction project in another country
A client, a steel-structure contractor from Linz, has won a contract to build a production hall near Regensburg. The schedule is ten months, with a crew of twenty and a site office on the plot. The client asks whether it must pay tax in Germany, and wants the answer before it signs.
The treaty answer looks simple. The work is in the detail: when the clock starts, whether interruptions count, what happens if the schedule slips past a year, and which German obligations apply whatever the treaty says. The crew’s wage tax is a separate question again.
What the research has to settle
The rules behind the answer
- The treaty sets a time test for sites
- Under the Austria–Germany tax treaty, a building site or construction or installation project is a permanent establishment only if it lasts more than twelve months. A ten-month project falls below that test if the schedule holds.
- Domestic law starts lower
- German and Austrian domestic law treat construction work lasting more than six months as a permanent establishment. The treaty then limits Germany’s right to tax the profit, so both layers belong in the memo.
- Count the whole project
- The period generally runs from the start of work on site, including preparatory work, until completion. Temporary interruptions usually count, and splitting one project into several contracts to stay under the limit is a known point of challenge.
- Other German obligations apply anyway
- A German business customer must withhold tax from payments for construction work unless the contractor gives it an exemption certificate from the German tax office. The crew’s wage tax follows the treaty’s employment rules, not the site test.
How it runs in azta
From the question to the document
The question, as you would type it
Austrian GmbH builds a steel production hall near Regensburg for a German customer. Planned duration ten months, crew of twenty, site office on the plot. Does it have a permanent establishment in Germany under the Austria–Germany treaty, and does the German construction withholding apply?
You start with
A contract for a ten-month construction project in another country
- 01
Describe the project
Give the contract, the schedule, the crew and any other German work. azta searches the treaty as published, the German and Austrian tax codes and the court decisions on construction sites.
Cited research· Free - 02
Read the treaty article and the domestic rule
Open the treaty provision and the domestic definitions in the reader, in German, with their in-force status.
Atlas statute reader - 03
Write the memo
Ask for a memo with the conclusion first, then the risks if the schedule moves and the German withholding. Edit it in Canvas.
Canvas · Ask azta· Pro - 04
Send it as Word
Export the memo to Word, add your sign-off and send it to the client.
Word export· Pro You send
A memo on whether the site creates a permanent establishment under the treaty
What you get
A memo on whether the site creates a permanent establishment under the treaty
Tax memo · draft
Regensburg project: permanent establishment in Germany
Conclusion. On the planned schedule, the project does not create a permanent establishment in Germany under the treaty, because it does not last more than twelve months. The profit from the contract remains taxable in Austria.
Risks. The test looks at the whole project, including delays and interruptions. If the work on site runs beyond twelve months, a permanent establishment exists from the start. We recommend recording the days on site and reviewing the position if the completion date moves.
Other obligations. Your customer will withhold German construction withholding tax from each payment unless you provide an exemption certificate, which we recommend applying for now. The wage tax position of the crew is covered in a separate note.
Outcomes on your numbers
What azta is worth on this task
Pro pays for itself after
10 minutes a month
At €170 an hour, that is all the time Pro (€27 a month) has to take off your desk to cover its price.
Example figures. Replace them with your own.
- Hours back a year
- 36
- Capacity at your rate
- €6,120
- More permanent-establishment memos a quarter
- 1.5
- Return on Pro
- 18.9×
- Research
- Drafting
- Your review
A scenario you set, not a promise. The hours that come back go to another client, or deeper into this one.
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Book a demoSources azta searches here
- RIS
- Gesetze im Internet
- Rechtsprechung im Internet
What stays with you
- The schedule and the facts on site, including any other projects in Germany.
- The position you take and the memo you sign.
- Applying for the exemption certificate and any registrations.
Frequently asked questions
- Does azta hold the tax treaties?
- It cites treaties as published in the national legislation it holds, alongside the domestic tax acts. Open the citation to read the treaty text in the original language.
- Does it hold the OECD commentary?
- No. azta holds legislation, court decisions, EU law and regulator material. It shows what it cites, so you can see where the commentary still needs reading.
- Can it compare the site test in several treaties?
- Yes. Ask for a table of the construction-site test in each treaty you name. Each row cites the treaty provision.
