How is active income classified by the tax authorities in accordance with the Foreign Tax Act?
Strategically, the question arises as to how active income is classified by the tax authorities in accordance with the German Foreign Tax Act.
If you operate a foreign company in a low-tax country, you should, as already explained, generate "active income" in order to avoid add-back taxation in the country of residence of the shareholders of this company.
The profits of the foreign company are otherwise subject to income tax in the shareholder's country of residence for shareholders who are natural persons.
Active income is precisely defined in the German Foreign Tax Act (AstG). All other income that is classified as non-active income is not sufficient to avoid add-back taxation in the shareholders' country of residence .
It becomes clear that an "alibi" activity is not enough.
Active income is:
Income from a production facility
Income from the extraction of natural resources
Income from construction work lasting longer than 12 months
What can I do if my foreign company does not generate any active income?
We provide support and advice on setting up a commercially established permanent establishment. Our authorized legal service providers offer consulting services to generate active income. Recruiting and retaining employees in the foreign company and generating active income in the foreign company is a target-oriented New Work strategy.
If a foreign EU company is founded, we will inform every entrepreneur of the requirements for "building up substance" as part of the structuring consultation without being asked.
We make it clear that many competitors completely neglect the issue of "building up substance" in the context of international tax law.
With a view to the moderate expense of use of our business addresses on 5 continentswe address entrepreneurs on their way to global entrepreneurship. We create clarity through positioning.
P.S. It follows: "Details of a commercially established place of business?"
How to set up a successful international company and do everything right from a multicultural perspective?
? How my team and I support your journey as a global entrepreneur?
➕ Location consulting
- Recording and analysis of the current situation
- Positioning your company
- Optimization of the company website
➕ NEW-WORK workshops and training courses
☑ Would you like to work with me and my team on your strategy for successful internationalization or use us for your company? Please contact us here: Contact
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