The place of management of a foreign corporation is where the sole managing director actually carries out the relevant day-to-day management activities. This was the ruling of the Lower Saxony Tax Court (Case No. 10 K 39/23).

The plaintiff is a Hungarian limited liability company (Kft.) founded in 2014. Its sole shareholder and managing director was Dr. P, a resident of Hungary. The company's purpose was to operate a medical practice. It did not have its own practice premises. Between 2015 and 2018, the plaintiff provided numerous on-call and standby medical services, as well as individual expert opinions, within Germany. These assignments were brokered through the online portal of the Association of Statutory Health Insurance Physicians of Lower Saxony. Dr. P personally provided the services in Germany. During these assignments, he used a long-term rented apartment as his residence. The plaintiff handled the billing for each individual assignment. The invoices included the plaintiff's German address, a German mobile phone number, and a German bank account. An average of approximately 19 payments were received monthly in the German account. The plaintiff did not conduct any operational activities in Hungary. No tax returns were filed in Germany. Following an external audit, the tax office assumed unlimited corporate income tax liability pursuant to Section 1 Paragraph 1 No. 1 of the German Corporate Income Tax Act (KStG), since the place of management was located in Germany. The plaintiff disputed this and referred to its Hungarian registered office and preparatory activities in Hungary.

The lawsuit was unsuccessful. According to Section 1 Paragraph 1 No. 1 of the German Corporation Tax Act (KStG), corporations are subject to unlimited tax liability if they have their place of management or registered office in Germany. The Hungarian Kft (limited liability company) is comparable to a German GmbH (limited liability company) in this context. The place of management is primarily determined by the center of the company's overall management, i.e., the location where the measures essential for day-to-day business operations are taken (Section 10 of the German Fiscal Code (AO)). The decisive factor is the actual circumstances. The Lower Saxony Tax Court found that the plaintiff worked exclusively for domestic clients. The organizationally and economically significant activities – service provision, invoicing, customer contact, and payment processing – took place in Germany. Invoices were prepared promptly after the services were rendered at the plaintiff's residence. The number of incoming payments indicated a substantial presence in Germany. The court found the plaintiff's general statements regarding short stays to be implausible. Preparatory online research in Hungary and the plaintiff's wife's employment as an employee were deemed irrelevant to the relevant decision-making process. A separate business establishment is not required for the place of management; the managing director's residence can also serve as the place of management. Due to insufficient cooperation, the court was permitted to assume the most probable facts. According to these facts, the center of overall business management was located at the residence. The plaintiff was therefore subject to unlimited corporate income tax liability. Even after the DBAHungary was Germany's state of residence (Art. 4 para. 1, para. 3). DBA-Hungary). The place of effective management was domestic. Profits were taxed according to Article 7. DBA-To tax Hungary in Germany.

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