Allocation of Profits to Construction or Installation Permanent Establishments

Abstract

The construction or installation permanent establishment has considerable practical importance. If a construction or installation permanent establishment has been established under domestic law and article 5(3) of the OECD Model , the question arises as to how to determine its profit. On the one hand, the OECD does this based on the generalized principles set out in the Authorised OECD Approach (AOA). On the other hand, Germany’s tax authorities have issued detailed regulations on determining profits for construction or installation permanent establishments, some of which are not consistent with the principles set out in the AOA.