Here’s the most common and most expensive misunderstanding we see: “I live in Germany, but my company is in Dubai, so it pays 0–9%.” The company may be registered in Dubai. If you run it from your kitchen table in Cologne, Germany sees a company managed in Germany. And a company managed in Germany is a German taxpayer.
This guide explains the rules behind that, why the registration address isn’t the decisive factor, and what “real” management abroad looks like. General information as of September 2026, not tax or legal advice.
Two ways a company becomes German-taxable
Under §1(1) KStG, a corporation is subject to unlimited German corporate tax if it has either of these in Germany:
| Connection | German term | Where it’s defined |
|---|---|---|
| Registered seat | Sitz | §11 AO: the place named in the articles, the law or the incorporation documents |
| Place of management | Ort der Geschäftsleitung | §10 AO: the centre of top-level business management |
Either one is enough. A Cyprus Ltd has its seat in Cyprus. But if its place of management is in Germany, it’s unlimited taxable in Germany on its worldwide profits, just like a GmbH.
Unlimited taxable means: corporate tax of 15% plus 5.5% solidarity surcharge on that tax (15.825% combined, as of 2026), plus trade tax (Gewerbesteuer) at a rate set by the municipality, typically between 7% and about 20%. In most cities you land near 30% in total. Germany has legislated a step-by-step cut of the corporate tax rate starting in 2028, but for 2026 the 15% applies.
What “place of management” means (§10 AO)
The law defines it in one sentence: the place of management is the centre of the top-level business management. German courts read that as the place where the person or people who run the company form the decisions that matter – the strategy, the big contracts, the hiring, the financing.
A few consequences that surprise people:
- Formalities don’t decide it. A registered address, a local nominee director or a board meeting once a year abroad doesn’t move management if the actual decisions are taken elsewhere.
- Where you are when you decide counts. If the managing director lives in Germany and makes decisions at home, that’s usually where management happens – even if the signatures go on paper in Dubai.
- Day-to-day admin is not management. Bookkeeping, sending invoices or handling the mailbox abroad don’t make management happen abroad. The strategic decisions are what counts.
- There can be more than one candidate. If decisions are really made in several places, the authorities weigh where the most important ones are made.
In a one-person company, the answer is almost always: management is wherever the one person lives and works.
Permanent establishment (§12 AO): the second hook
Even if the company isn’t unlimited taxable, Germany can tax the profits of a German permanent establishment (PE) under limited tax liability. §12 AO defines a PE as a fixed place of business that serves the company’s business. The law explicitly lists the place of management as a PE, followed by branches, offices, factories and workshops.
So a German place of management gives Germany two hooks at once: unlimited tax liability of the company, and a PE on German soil. Treaties then decide who gets what, but the starting point is clear.
The PE question also matters if you don’t manage the whole company from Germany but regularly work for it from Germany – for example a home office that’s at your disposal and used continuously. Whether a home office counts as a PE depends on the facts; the OECD commentary discusses it in detail, and the answer is “sometimes”, which is the least comforting word in tax law.
When two countries claim the company: treaty tie-breakers
If a company is resident in Germany (managed here) and also resident in another country (for example by incorporation there), both countries claim it. A double tax treaty can then decide which one it is resident in for treaty purposes. How that works depends on the treaty’s version of Article 4(3):
| Treaty model | Tie-breaker for companies |
|---|---|
| OECD Model before 2017, and most existing German treaties | Place of effective management: the company is resident where it’s effectively managed |
| OECD Model 2017 | Mutual agreement: the tax authorities try to agree, looking at place of effective management, place of incorporation and other factors. If they don’t agree, the company may not get treaty benefits |
| No treaty | No tie-breaker: both countries can tax, with at most a unilateral credit |
Look at what happens in practice:
- Most treaties: the place of effective management decides. If you run the company from Germany, it’s German for treaty purposes too. The registration country loses.
- 2017-style treaties: you depend on two tax authorities agreeing. Until they do, you may have double taxation.
- No treaty: Germany has no double tax treaty with the UAE since the old one expired at the end of 2021. A Dubai company managed from Germany is fully German-taxable, and the UAE can tax it too.
The treaty never helps you if the facts point to Germany. It only helps if management genuinely happens abroad.
Worked example: the Dubai company run from Munich
Max lives in Munich. He sets up a Dubai free zone company for his consulting business and expects 0% tax on qualifying income. The company earns €300,000 profit in 2026. Max makes every decision from his home office in Munich and visits Dubai twice a year.
| What Max hoped | What the German tax office sees | |
|---|---|---|
| Place of management | Dubai | Munich |
| Corporate tax status | UAE only | Unlimited German corporate tax liability |
| German corporate tax + solidarity surcharge (15.825%) | €0 | about €47,500 |
| Trade tax (Munich, multiplier 490% × 3.5% = 17.15%) | €0 | about €51,500 |
| Total German tax on the company | €0 | about €99,000 |
| Treaty relief | – | None: no DTA with the UAE |
On top of that, dividends Max takes out are taxed at his personal level in Germany. The rough figures ignore add-backs and deductions in the trade tax base.
If the German tax office discovers this years later, it can assess back taxes plus interest – and, if things were concealed, it becomes a criminal tax matter. The Dubai company might also owe UAE corporate tax, depending on its status there. That’s how a 0% plan becomes a 30%+ plan with extra paperwork.
Even if management were genuinely in Dubai, Max still lives in Germany, so the German CFC rules could add the company’s profits to his income anyway: see CFC rules in Germany.
What real management abroad looks like
If you want a company to be managed abroad, management has to actually happen abroad. The usual ingredients:
- The decision-makers are there. Either you live in the company’s country, or the company has one or more directors there who genuinely make the decisions – not a nominee who signs whatever you email.
- Board meetings happen there, and they’re real. Held in the country, with proper notice, real discussion and minutes that record actual decisions. Flying in once a year to sign pre-written minutes is weak evidence.
- There’s an office. Not just a registered address. A place where the business is run from.
- Contracts are negotiated and signed there. Big deals signed at your German desk tell their own story.
- Bank and payments are controlled there. If only you in Germany can approve payments, that’s where control is.
- The e-mail and laptop reality matches the paperwork. Tax audits look at metadata, calendar entries, IP logs, travel data and who wrote which e-mail from where. If your minutes say “Limassol” and your laptop says “Munich”, the laptop wins.
For most founders, the honest conclusion is simple: the only reliable way to have your company managed abroad is to live abroad yourself. That’s why the leaving Germany guide and this one belong together.
Common structures and where they go wrong
| Structure | Typical plan | Typical problem if the owner lives in Germany |
|---|---|---|
| UAE free zone company | 0% qualifying income, 9% above AED 375,000 otherwise | Managed from Germany → German corporate and trade tax, no treaty |
| Cyprus Ltd | 15% CIT (as of 2026) | Managed from Germany → German tax residency under the treaty’s management test |
| Estonian OÜ via e-Residency | 0% on retained profits | e-Residency is not residence. Managed from Germany → German company taxation |
| US LLC | Tax-transparent in the US for non-residents | Germany may treat it as transparent or as a corporation; either way, profits from work done in Germany are taxed in Germany. See US LLC for Europeans |
| Malta Ltd | 35% with 6/7 refund, ≈5% effective | Managed from Germany → German tax; refund structure doesn’t help |
None of these structures are illegal. They work well for people who actually live and work outside Germany. The problem is only the combination “German life, foreign company, German decisions”.
