SMEs form the backbone of the German economy. 99% of all companies belong to the “SME” sector, i.e. the category of small and medium-sized enterprises. Also due to the international relations of many companies, it is not surprising that SMEs are increasingly expanding into other countries. In order to avoid possible tax pitfalls, today we take a look at the middle class model and Dubai.
For Dubai and the United Arab Emirates, it should be noted as a special feature that since 2021 there is no double taxation agreement between them and Germany.
First principle: The SME model at a glance
The SME model is based on the fundamental desire of a company to expand its own business abroad or to gain an entrepreneurial foothold there. The latter wish may consist, for example, in the establishment of a branch, i.e. a foreign permanent establishment under German law. In principle, companies have several options here, whereby we assume from a GmbH & Co. KG based in Germany and taxable with the shareholders here:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.