Facts of the case
Mr. X, a U.K. national with residential properties in Germany and the U.K. (which can be considered his ‘center of vital interests’; relevant for Art. 4 ‘Resident’), was an aircraft mechanic/engineer who held licenses to maintain various types of aircraft during the years in question (i.e., 2008 to 2014).
Mr. X was the sole shareholder and director (without a written employment contract) of X Ltd., a U.K. registered company founded in 2006. X Ltd. does not have a website or phone number, and its registered office address is shared by about 130 other companies/entities, including the tax office. The financial statements of X Ltd., prepared in the U.K., show salary payments to Mr. X in his capacity as director in 2011.
In 2008, Mr. X/X Ltd. entered into a ‘Freelance Agreement’ with Y Ltd., a U.K. company, agreeing to provide aircraft-related maintenance services as a subcontractor to the clients of Y Ltd. Y Ltd. had entered into a ‘Line Maintenance Agreement’ with A GmbH, a German operator and charterer of aircraft, agreeing to provide licensed aircraft maintenance personnel and tools. Between 2008 and 2014, Mr. X carried out his work on the airport premises of A GmbH where changing rooms, administrative areas and common areas were available to the engineers and mechanics working on behalf of Y Ltd. (in rooms rented by Y Ltd. from A GmbH). Among other facilities, the engineers and mechanics had a lockable locker for storing their belongings; a sign bearing their names and that of Y Ltd. was affixed to the locker doors.
At the entrance to the airport premises, all personnel (including the engineers and mechanics working on behalf of Y Ltd.) had to undergo a security check, after which they were free to move around inside the premises. Mr. X had a security pass for the airport premises. Access was technically possible regardless of the shift schedule. Engineers and mechanics working for Y Ltd. logged in and out of A GmbH’s time recording system at the start and end of their shifts. Y Ltd. issued its invoices to A GmbH based on the working hours communicated to it by A GmbH.
On October 20, 2008, Mr. X had applied for a German tax number. In the questionnaire for tax registration, Mr. X stated that he was self-employed as an aircraft engineer since April 1, 2008, and gave his residential address as a location in Germany. On this basis, the German tax authorities concluded that Mr. X’s income from the aircraft maintenance services provided at the airport in Germany was taxable in Germany. Since Mr. X had not filed any tax returns in Germany, the German tax authorities made an assessment of his German tax liability for 2008 based on his time logs and invoices from Y Ltd to A GmbH. Mr. X appealed the assessment, commencing discussions with the German tax authorities. As the discussions progressed, the German tax authorities included the years 2009-2014 in the discussions, assessing Mr. X’s tax liability in Germany the same way they did for 2008.
