Tax Treaty Case Law around the Globe 2013

1. S. 271 Introduction

The decision by the German Bundesfinanzhof concerns the interpretation of the 183-day rule in Article 15 (2) lit. a OECD Model Convention. The question raised in this case is whether only days of physical presence in the State of activity count towards the 183-day threshold or whether weekends spent outside the State of activity may also be taken into account.

2. Facts of the case

The taxpayer was a French resident working for a French employer. On many days during the relevant tax year, his employer sent him to Germany to work at a variety of different places. His employer did not have a permanent establishment in Germany. The taxpayer commuted to Germany to undertake his employer’s projects, meaning that he left his home in France each morning and returned home each evening; he did not spend any nights, weekends, or holidays in Germany.

The German tax administration considered that he should be subject to limited tax liability on the salary he had earned for his employment activities in Germany. According to German tax law, an employee is subject to limited tax liability if his activity is exercised in Germany. The taxpayer, however, argued that the then applicable ...