1. Introduction

Recently, we analysed a controversial binding ruling of the Danish tax board, wherein a German company (a main contractor) was held to have a fixed place permanent establishment (PE) in Denmark – because it had subcontracted certain building maintenance work to another company – even though the main contractor neither performed any activity in Denmark, nor had physical presence in Denmark. In that ruling, the Danish Tax Board seems to have disregarded the fundamental and well-established requirements for existence of a fixed place permanent establishment. That approach is also evident in the Danish Tax Board’s another binding ruling issued on the same date. For ease of reference, that ruling may be referred to as the “Sales Representative Ruling”, which is the subject-matter of this article.

In the above-mentioned Sales Representative Ruling, the Danish Tax Board held that a German company had a fixed place PE at the home of its employee in Denmark. For the reasons discussed in detail in this article, the Danish Tax Board’ approach and conclusion in that ruling seem erroneous. It could have far-reaching implications, cause significant confusion, and substantial international tax litigation in view of the rather large number of companies employing mobile sales staff in other countries without establishment of offices in those countries.