In the case of cross-border contribution, the resulting capital gain shall be determined in accordance with the nature of the transfer. 7 par. 2 and Art. 13 paras 1 to 5 OECD-MA, since the assets of the (domestic) establishment are subject to the territoriality principle. A distinction must be made between immovable and movable assets. In this article, you will therefore find a more detailed explanation of the taxation right of sales in transfer transactions with an international reference.

The permanent establishment is not a legally separate entity, so that the assets of the permanent establishment are civilly owned by the transferor before their transfer to a corporation and civilly owned by the receiving corporation after the transfer. The assets of the transferred permanent establishment thus form, together with the assets of the respective parent company, a legal and factual unit (economic assets of the entire company). In the case of cross-border undertakings, it would be contrary to the territoriality principle[148] if the profits from the sale of the assets, irrespective of their location and permanent establishment, were always attributed to the parent company. In the OECD-MA, the profit from the sale of the assets is therefore determined in accordance with art. 7 par. 2 and Art. 13 paras 1 to 5 OECD-MA distributed between parent company and premises:

2nd paragraph of Article 13 OECD-MA: immovable property

For immovable property in accordance with Art. 6 OECD-MA (especially real estate), the taxation right derives from Art. 13 para 1 OECD-MA. Thereafter, the capital gain is taxed in the Contracting State in which the property is located.

3. art.13 para 2 and art. 7 par. 2 OECD-MA: movable operating assets

Art. 7 and 13 para. 2 OECD-MA in a competitive relationship. According to Art. 13 para. 2 OECD-MA, the taxation of capital gains is due to the local state if the asset is attributable to a permanent establishment which has a company in the other state, during art. 7 par. 2 OECD-MA allocates to each establishment the profits it could have made if it had carried out the same or similar business as an independent and independent company (Functionally Separate Entity Approach). While the OECD-MK[149] does not conclusively clarify the jurisdiction between Articles 7 and 13 of the OECD-MA, the literature[150] correctly considers that the sale of fixed assets by art. 13 para 2 OECD-MA is to be assessed. The profit on the sale of working capital (in particular the stock) is considered as current profit in accordance with the nature. 7 par. 2 OECD-MA.

The view expressed in the OECD-MK that Articles 7 and 13 of the OECD-MA[151] always lead to the same results is incorrect and has already been refuted by the decisions of the BFH in 1973[152] and 1989[153]. In both decisions, the profit on the sale of a shareholding in a limited liability company was reduced by type. 13 OECD-MA (Art. 10 DBA-India) and the profit or Loss on depreciation on share capital participation as current profit by type. 7 OECD-MA (Art. 3 DBA-India). In doing so, Article 10 of the DTA‐India assigned to the local state (India) and Art. 3 DBA-India grants the right of taxation to the State of residence (Germany).

It is true, however, that both articles are coordinated in such a way that one article is always used in divestment operations and this then excludes the application of the other article.[154] This excludes both double and no-time taxation.

The profit from the sale of seagoing vessels and aircraft operated in international traffic shall be determined by type. 13 para 3 OECD-MA assigned to the parent company of the taxpayer.

Art. 5. 13, par. 4, OECD-MA: Shares in real estate corporations

Art. 13 para. 4 OECD-MA ensures equal treatment of real estate held directly and indirectly through a corporation. For this purpose, the right to tax shares in corporations whose assets consist of more than 50 percent of real estate in a contracting state is assigned to the local state. [155]

Art. 6. 13 para 5 OECD-MA: Other assets

This is a set of cases not mentioned in paragraphs 1 to 4. Accordingly, if property is disposed of which is not already allocated to a Contracting State under paragraphs 1 to 4, the profit from the disposal of that other property shall be due to the State of residence.

In private assets, this paragraph is particularly relevant for investments in corporations. In business assets, all those assets are allocated to the parent company in the country of residence by way of paragraph 5 and thus the taxation right thereto which is not attributable to a foreign permanent establishment by way of paragraph 2.