What tax obligations arise from establishing a subsidiary abroad?
March 3, 2023 | 50,00 EUR | answered by Siegfried Strauss
Dear tax consultant,
My name is Verena Büchner, and I am the managing director of a medium-sized company in Germany. We are planning to establish a subsidiary abroad in order to expand our international business activities. However, I am concerned about the tax obligations and consequences that could arise from this decision.
Currently, we are familiar with German tax laws and fulfill our tax duties diligently. However, I am unsure about how establishing a subsidiary abroad will impact our tax burden. What taxes will we have to pay in the respective country, and how will they be calculated? Are there any double taxation agreements that could benefit us?
Furthermore, I am wondering if we have any special documentation obligations towards the German tax authorities when establishing a subsidiary abroad. Do we need to prepare a specific tax report, and what data should be included in it? How can we ensure that we fulfill all tax obligations and avoid any risks?
I would greatly appreciate it if you could provide me with an overview of the tax aspects of establishing a subsidiary abroad. Additionally, I would like to know what specific steps we need to take to optimize our tax situation and minimize potential risks.
Thank you in advance for your assistance.
Sincerely,
Verena Büchner
Dear Mrs. Büchner,
Thank you for your inquiry regarding the tax aspects of establishing a subsidiary abroad. It is understandable that you are concerned about the possible tax obligations and consequences, as this is an important aspect of international business activities.
When establishing a subsidiary abroad, it is important to be aware that in addition to German tax laws, you must also comply with the tax laws of the country where the subsidiary is located. Typically, subsidiaries abroad are subject to corporate tax in the respective country. This tax is calculated on the profit of the subsidiary and may vary depending on the country and the amount of profit.
However, there are many countries that have double taxation agreements with Germany to ensure that companies are not taxed twice on the same profit. These agreements usually determine which country has the right to tax and how double taxation can be avoided. Therefore, it is advisable to familiarize yourself with existing double taxation agreements in advance and, if necessary, seek tax advice.
In terms of documentation obligations towards the German tax authorities, you must ensure that all relevant tax documents and data can be properly stored and presented. This includes preparing a tax report that details the financial and tax situation of the subsidiary.
To optimize your tax situation and minimize potential risks, I recommend contacting an experienced tax advisor early on. They can assist you in selecting the location for the subsidiary, designing the company structure, and fulfilling all tax obligations.
I hope this information is helpful to you and I am available for any further questions.
Best regards,
Siegfried Strauss, Tax Advisor
