ANNEX TO THE CONVENTION BETWEEN THE FEDERAL REPUBLIC OF GERMANY AND THE NETHERLANDS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

Where a legal person has its place of effective management in a cross-border economic area and the common border between the Contracting States runs through the fixed place of business in which the place of effective management is situated, the legal person under paragraph (4) of Article 4 of the Convention shall be deemed to be a resident only of the following Contracting State:

• (a) If it is possible to determine clearly in which of the Contracting States the legal person has its place of effective management, the legal person shall be deemed to be a resident only of that State.
• (b) If it is not possible to determine clearly in which of the Contracting States the legal person has its place of effective management, the legal person shall be deemed to be a resident only of the State that is the location of the larger part of the floor area used by the enterprise in the building where the effective management of the enterprise is exercised.

Examples:

Example 1:

The place of effective management can be determined clearly

The Netherlands has the right to tax the profits of the enterprise (paragraph (4) of Article 4 in conjunction with paragraphs (1) and (4) of Article 7 of the Convention).

Example 2:

The place of effective management cannot be determined clearly because this is not situated clearly in one of the two Contracting States.

The decision is taken on the basis of the larger part of the floor area used by the enterprise in the building where the effective management of the enterprise is exercised.

Floor area used by enterprise: 100m² + 100m² + 400m² = 600m² 48

Of that, part of floor area in the Federal Republic of Germany: 50m² + 50m²

Of that, part of floor area in the Netherlands: 50 m² + 50 m² = 100 m²

The Federal Republic of Germany has the right to tax the profits of the enterprise (paragraph (4) of Article 4 in conjunction with paragraphs (1) and (4) of Article 7 of the Convention).

Example 3:

The place of effective management cannot be determined clearly because this is not situated clearly in one of the two Contracting States.

The decision is taken on the basis of the larger part of the floor space used by the enterprise in the building where the effective management of the enterprise is exercised (in this case, building 1).

Floor area used by enterprise: 100m² + 100m² = 200m²

Of that, part of floor area in the Federal Republic of Germany: 30m² + 30m²

Of that, part of floor space in the Netherlands: 70m² + 70m² = 140m²

The Netherlands has the right to tax the profits of the enterprise (paragraph (4) of Article 4 in conjunction with paragraphs (1) and (4) of Article 7 of the Convention).

Example 4:

The place of effective management cannot be determined clearly because this is not situated clearly in one of the two Contracting States.

The decision is taken on the basis of the larger part of the floor area used by the enterprise in the building where the effective management of the enterprise is exercised.

Floor area used by enterprise: 250m²

Of that, part of floor area in the Federal Republic of Germany: 200m²

Of that, part of floor area in the Netherlands: 50m²

The Federal Republic of Germany has the right to tax the profits of the enterprise (paragraph (4) of Article 4 in conjunction with paragraphs (1) and (4) of Article 7 of the Convention).