Going Cosmopolitan – Typical Mistakes with Foreign Companies
Key Takeaways
Foreign companies don't automatically create tax exemption in your home country
Permanent establishments arise through operational control, even with foreign companies
Perpetual travelers without a new tax residence often remain taxable
Cosmopolitan structures require solid understanding of the rules
The trap of founders going international
Why being cosmopolitan does not mean opting out of reality.
Thinking cosmopolitan is one of the CEOPRENEUR principles.
Not to blindly incorporate entities around the globe –
but to choose the best tools for your business and your life with intent.
And this is exactly where the problem starts:
Many entrepreneurs go international – without a solid understanding of what they are doing.
The two most common mistakes
Made almost every time, but easy to avoid:
The overlooked permanent establishment
"I set up a foreign company – so I am out of the German tax system."
❌ No, you are not.
If you control the foreign company, run it operationally or act as managing director, a permanent establishment arises in your home country – with all the tax consequences that come with it.
What that means in practice:
- • Even though the company was incorporated abroad
- • you have to register it for tax purposes in your home country
- • report revenue – and potentially tax it in full
Legal basis:
- Sec. 10 AO (German Fiscal Code): definition of permanent establishment
- OECD Model Convention Art. 5: international interpretation
- German Federal Fiscal Court (BFH) rulings: on attributing a permanent establishment when management is exercised from the home country
The myth of the perpetual traveller
"I have deregistered in Germany and I am registered nowhere – so I am tax free."
❌ That is wrong too.
A common mistake:
You use a pass-through entity (for example a US-LLC) and believe you are tax "free" once you no longer have a residence anywhere.
What is overlooked:
Even after you deregister from Germany (or Switzerland), tax liability can remain – if you have not established a new tax residence somewhere.
Because:
If no other country taxes your income, your former state of residence will reach back in – usually retroactively.
Particularly relevant for:
- • "Digital nomads" without a fixed registered address
- • LLCs or partnerships with tax transparency
- • Income that does not officially show up in any country
Legal basis:
- Sec. 1 EStG (German Income Tax Act): tax liability even without a residence
- BFH ruling of 25 January 1994, I R 86/93: tax liability through economic affiliation
- OECD commentary on Art. 4: tax residence in cases of dual residence or statelessness
Bottom line: cosmopolitan ≠ naive
The right structure can give you freedom, scalability and tax efficiency.
But only if you know the rules of the game.
✅ The right approach:
An LLC is not a shield – it is a tool you have to understand and integrate correctly.
Deregistering only makes sense if you move into a stable tax environment with real substance – including a registered address, bank access and taxation.
Your structure should give you long-term scalability, legal clarity and exit readiness – not short-term illusions.
Disclaimer:
This article is for strategic orientation only and is not a substitute for tax or legal advice.
CEOPRENEUR provides entrepreneurial structure advisory – not tax or legal services.
For tax or legal specifics we recommend working with a qualified specialist advisor.
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Simon
Founder of CEOPRENEUR and an expert in systematic entrepreneurship. Simon helps founders build companies that function, scale and can be sold without them.