The plaintiff was a limited liability company that was founded in Germany in 2008. In 2009, the plaintiff acquired a residential and commercial building in Germany, which it entrusted to a German service provider for management. The plaintiff gave the service provider a comprehensive power of attorney to act on its behalf in all matters related to the property, including concluding and terminating rental contracts, hiring, and firing service providers, making repairs and maintenance, dealing with authorities and courts, and accessing the plaintiff's bank account. In 2012, the plaintiff sold its property. The local tax authority assessed German trade tax based on the income from the property sale. The plaintiff challenged the tax assessment, arguing that it did not have a permanent establishment in Germany, as its place of management was in Luxembourg, where the director made the management decisions and signed the tax returns.

The Lower Tax Court of Brandenburg dismissed the plaintiff's appeal. The court held that the plaintiff was subject to German trade tax, as it had a place of management in Germany in the premises of the service provider that it had commissioned to manage the property. The court applied the legal definition of a place of management as the place where the will of the company is formed and the measures of some importance for the management are ordered. The court distinguished between the ordinary business operations and the extraordinary or fundamental decisions of the company and found that the former were carried out by the service provider in Germany, while the latter were irrelevant for the determination of the place of management. The court relied on the broad power of attorney that the plaintiff had granted to the service provider, which enabled it to conduct the daily business of renting the property and to represent the plaintiff in all matters concerning the property.

The court rejected the plaintiff's argument that the power of attorney was only for practical reasons and that the service provider had no independent decision-making authority. The court found that the plaintiff had not sufficiently substantiated its claim that the director had actually made the management decisions in Luxembourg, and that the mere residence of the director in Luxembourg did not establish a place of management there. The court also dismissed the plaintiff's argument that the income from the property sale should be allocated to Luxembourg, as the plaintiff had not proven that it had a permanent establishment there.

A non-resident investor in German real estate should therefore ascertain, that:

• its ordinary business activities are exercised and documented in its territory of residency,
• any power of attorney to a German service provider is limited to rendering of specific services only, and
• this mode of operation is always properly displayed in any statements toward the tax authorities.

It is important to note that a German place of management triggers not only German trade tax but leads to an unlimited tax liability in Germany. This means that the landlord is subject to German income and trade tax on its worldwide income.