Would there not be legal obstacles to applying foreign tax law domestically?
There should not be. In the Commission’s view it would not be necessary to change domestic tax codes in order to implement the pilot scheme. The Commission suggests using existing double taxation treaties or concluding an appropriate multilateral convention. Both have to be passed by national Parliaments and thus receive equivalent status of national laws. There are existing examples for this way of proceeding, for example as regards the tax treatment of construction works in many tax treaties. In most of the treaties which Member States have concluded with each other, construction works are not considered to constitute a taxable permanent establishment even when they fulfil all the conditions, provided their presence is limited in time. Furthermore, Germany and the Netherlands have recently agreed on a protocol to their double-taxation treaty that allows companies to be active in border areas on the territory of the other state while having to comply with their domestic tax law only.
