diff --git a/cli/internal/cloudcmd/clients.go b/cli/internal/cloudcmd/clients.go
index a05f2e811..2173f7fa3 100644
--- a/cli/internal/cloudcmd/clients.go
+++ b/cli/internal/cloudcmd/clients.go
@@ -46,7 +46,7 @@ type tfIAMClient interface {
 type tfUpgradePlanner interface {
 	ShowPlan(ctx context.Context, logLevel terraform.LogLevel, output io.Writer) error
 	Plan(ctx context.Context, logLevel terraform.LogLevel) (bool, error)
-	PrepareUpgradeWorkspace(embeddedPath, backupDir string, vars terraform.Variables) error
+	PrepareWorkspace(path string, vars terraform.Variables) error
 }
 
 type tfIAMUpgradeClient interface {
diff --git a/cli/internal/cloudcmd/clusterupgrade.go b/cli/internal/cloudcmd/clusterupgrade.go
index 0227c3686..b3c8cd054 100644
--- a/cli/internal/cloudcmd/clusterupgrade.go
+++ b/cli/internal/cloudcmd/clusterupgrade.go
@@ -36,7 +36,7 @@ type ClusterUpgrader struct {
 func NewClusterUpgrader(ctx context.Context, existingWorkspace, upgradeWorkspace string,
 	logLevel terraform.LogLevel, fileHandler file.Handler,
 ) (*ClusterUpgrader, error) {
-	tfClient, err := terraform.New(ctx, constants.TerraformWorkingDir)
+	tfClient, err := terraform.New(ctx, existingWorkspace)
 	if err != nil {
 		return nil, fmt.Errorf("setting up terraform client: %w", err)
 	}
@@ -57,7 +57,8 @@ func (u *ClusterUpgrader) PlanClusterUpgrade(ctx context.Context, outWriter io.W
 ) (bool, error) {
 	return planUpgrade(
 		ctx, u.tf, u.fileHandler, outWriter, u.logLevel, vars,
-		filepath.Join("terraform", strings.ToLower(csp.String())),
+		filepath.Join(constants.TerraformEmbeddedDir, strings.ToLower(csp.String())),
+		u.existingWorkspace,
 		filepath.Join(u.upgradeWorkspace, constants.TerraformUpgradeBackupDir),
 	)
 }
diff --git a/cli/internal/cloudcmd/clusterupgrade_test.go b/cli/internal/cloudcmd/clusterupgrade_test.go
index 07c011fe7..11a77e7a1 100644
--- a/cli/internal/cloudcmd/clusterupgrade_test.go
+++ b/cli/internal/cloudcmd/clusterupgrade_test.go
@@ -24,12 +24,12 @@ import (
 
 func TestPlanClusterUpgrade(t *testing.T) {
 	setUpFilesystem := func(existingFiles []string) file.Handler {
-		fs := afero.NewMemMapFs()
+		fs := file.NewHandler(afero.NewMemMapFs())
+		require.NoError(t, fs.MkdirAll("test"))
 		for _, f := range existingFiles {
-			require.NoError(t, afero.WriteFile(fs, f, []byte{}, 0o644))
+			require.NoError(t, fs.Write(f, []byte{}))
 		}
-
-		return file.NewHandler(fs)
+		return fs
 	}
 
 	testCases := map[string]struct {
@@ -199,6 +199,6 @@ func (t *tfClusterUpgradeStub) ApplyCluster(_ context.Context, _ cloudprovider.P
 	return state.Infrastructure{}, t.applyErr
 }
 
-func (t *tfClusterUpgradeStub) PrepareUpgradeWorkspace(_, _ string, _ terraform.Variables) error {
+func (t *tfClusterUpgradeStub) PrepareWorkspace(_ string, _ terraform.Variables) error {
 	return t.prepareWorkspaceErr
 }
diff --git a/cli/internal/cloudcmd/create.go b/cli/internal/cloudcmd/create.go
index ec10340c4..85031a7fc 100644
--- a/cli/internal/cloudcmd/create.go
+++ b/cli/internal/cloudcmd/create.go
@@ -23,6 +23,7 @@ import (
 	"github.com/edgelesssys/constellation/v2/cli/internal/terraform"
 	"github.com/edgelesssys/constellation/v2/internal/cloud/cloudprovider"
 	"github.com/edgelesssys/constellation/v2/internal/config"
+	"github.com/edgelesssys/constellation/v2/internal/constants"
 	"github.com/edgelesssys/constellation/v2/internal/imagefetcher"
 )
 
@@ -213,7 +214,7 @@ func (c *Creator) createOpenStack(ctx context.Context, cl tfResourceClient, opts
 }
 
 func runTerraformCreate(ctx context.Context, cl tfResourceClient, provider cloudprovider.Provider, vars terraform.Variables, outWriter io.Writer, loglevel terraform.LogLevel) (output state.Infrastructure, retErr error) {
-	if err := cl.PrepareWorkspace(path.Join("terraform", strings.ToLower(provider.String())), vars); err != nil {
+	if err := cl.PrepareWorkspace(path.Join(constants.TerraformEmbeddedDir, strings.ToLower(provider.String())), vars); err != nil {
 		return state.Infrastructure{}, err
 	}
 
@@ -284,7 +285,7 @@ func (c *Creator) createQEMU(ctx context.Context, cl tfResourceClient, lv libvir
 		vars.Firmware = toPtr(opts.Config.Provider.QEMU.Firmware)
 	}
 
-	if err := cl.PrepareWorkspace(path.Join("terraform", strings.ToLower(cloudprovider.QEMU.String())), vars); err != nil {
+	if err := cl.PrepareWorkspace(path.Join(constants.TerraformEmbeddedDir, strings.ToLower(cloudprovider.QEMU.String())), vars); err != nil {
 		return state.Infrastructure{}, fmt.Errorf("prepare workspace: %w", err)
 	}
 
diff --git a/cli/internal/cloudcmd/iam.go b/cli/internal/cloudcmd/iam.go
index 20f31be6e..529e329b7 100644
--- a/cli/internal/cloudcmd/iam.go
+++ b/cli/internal/cloudcmd/iam.go
@@ -18,6 +18,7 @@ import (
 	"github.com/edgelesssys/constellation/v2/cli/internal/terraform"
 	"github.com/edgelesssys/constellation/v2/internal/cloud/cloudprovider"
 	"github.com/edgelesssys/constellation/v2/internal/cloud/gcpshared"
+	"github.com/edgelesssys/constellation/v2/internal/constants"
 )
 
 // IAMDestroyer destroys an IAM configuration.
@@ -144,7 +145,7 @@ func (c *IAMCreator) createGCP(ctx context.Context, cl tfIAMClient, opts *IAMCon
 		Zone:             opts.GCP.Zone,
 	}
 
-	if err := cl.PrepareWorkspace(path.Join("terraform", "iam", strings.ToLower(cloudprovider.GCP.String())), &vars); err != nil {
+	if err := cl.PrepareWorkspace(path.Join(constants.TerraformEmbeddedDir, "iam", strings.ToLower(cloudprovider.GCP.String())), &vars); err != nil {
 		return IAMOutput{}, err
 	}
 
@@ -171,7 +172,7 @@ func (c *IAMCreator) createAzure(ctx context.Context, cl tfIAMClient, opts *IAMC
 		ServicePrincipal: opts.Azure.ServicePrincipal,
 	}
 
-	if err := cl.PrepareWorkspace(path.Join("terraform", "iam", strings.ToLower(cloudprovider.Azure.String())), &vars); err != nil {
+	if err := cl.PrepareWorkspace(path.Join(constants.TerraformEmbeddedDir, "iam", strings.ToLower(cloudprovider.Azure.String())), &vars); err != nil {
 		return IAMOutput{}, err
 	}
 
@@ -199,7 +200,7 @@ func (c *IAMCreator) createAWS(ctx context.Context, cl tfIAMClient, opts *IAMCon
 		Prefix: opts.AWS.Prefix,
 	}
 
-	if err := cl.PrepareWorkspace(path.Join("terraform", "iam", strings.ToLower(cloudprovider.AWS.String())), &vars); err != nil {
+	if err := cl.PrepareWorkspace(path.Join(constants.TerraformEmbeddedDir, "iam", strings.ToLower(cloudprovider.AWS.String())), &vars); err != nil {
 		return IAMOutput{}, err
 	}
 
diff --git a/cli/internal/cloudcmd/iamupgrade.go b/cli/internal/cloudcmd/iamupgrade.go
index bab789ac2..dcf8b331c 100644
--- a/cli/internal/cloudcmd/iamupgrade.go
+++ b/cli/internal/cloudcmd/iamupgrade.go
@@ -42,7 +42,7 @@ type IAMUpgrader struct {
 func NewIAMUpgrader(ctx context.Context, existingWorkspace, upgradeWorkspace string,
 	logLevel terraform.LogLevel, fileHandler file.Handler,
 ) (*IAMUpgrader, error) {
-	tfClient, err := terraform.New(ctx, constants.TerraformIAMWorkingDir)
+	tfClient, err := terraform.New(ctx, existingWorkspace)
 	if err != nil {
 		return nil, fmt.Errorf("setting up terraform client: %w", err)
 	}
@@ -61,7 +61,8 @@ func NewIAMUpgrader(ctx context.Context, existingWorkspace, upgradeWorkspace str
 func (u *IAMUpgrader) PlanIAMUpgrade(ctx context.Context, outWriter io.Writer, vars terraform.Variables, csp cloudprovider.Provider) (bool, error) {
 	return planUpgrade(
 		ctx, u.tf, u.fileHandler, outWriter, u.logLevel, vars,
-		filepath.Join("terraform", "iam", strings.ToLower(csp.String())),
+		filepath.Join(constants.TerraformEmbeddedDir, "iam", strings.ToLower(csp.String())),
+		u.existingWorkspace,
 		filepath.Join(u.upgradeWorkspace, constants.TerraformIAMUpgradeBackupDir),
 	)
 }
diff --git a/cli/internal/cloudcmd/tfupgrade.go b/cli/internal/cloudcmd/tfupgrade.go
index 6f5f225ef..7f44f09fb 100644
--- a/cli/internal/cloudcmd/tfupgrade.go
+++ b/cli/internal/cloudcmd/tfupgrade.go
@@ -21,19 +21,19 @@ import (
 func planUpgrade(
 	ctx context.Context, tfClient tfUpgradePlanner, fileHandler file.Handler,
 	outWriter io.Writer, logLevel terraform.LogLevel, vars terraform.Variables,
-	templateDir, backupDir string,
+	templateDir, existingWorkspace, backupDir string,
 ) (bool, error) {
 	if err := ensureFileNotExist(fileHandler, backupDir); err != nil {
 		return false, fmt.Errorf("backup directory %s already exists: %w", backupDir, err)
 	}
 
-	// Backup the old Terraform workspace and move the embedded Terraform files into the workspace.
-	err := tfClient.PrepareUpgradeWorkspace(
-		templateDir,
-		backupDir,
-		vars,
-	)
-	if err != nil {
+	// Backup old workspace
+	if err := fileHandler.CopyDir(existingWorkspace, backupDir); err != nil {
+		return false, fmt.Errorf("backing up old workspace: %w", err)
+	}
+
+	// Move the new embedded Terraform files into the workspace.
+	if err := tfClient.PrepareWorkspace(templateDir, vars); err != nil {
 		return false, fmt.Errorf("preparing terraform workspace: %w", err)
 	}
 
diff --git a/cli/internal/cloudcmd/tfupgrade_test.go b/cli/internal/cloudcmd/tfupgrade_test.go
index 1ee0ea948..717abeb2e 100644
--- a/cli/internal/cloudcmd/tfupgrade_test.go
+++ b/cli/internal/cloudcmd/tfupgrade_test.go
@@ -9,6 +9,7 @@ package cloudcmd
 import (
 	"context"
 	"io"
+	"path/filepath"
 	"testing"
 
 	"github.com/edgelesssys/constellation/v2/cli/internal/terraform"
@@ -19,6 +20,19 @@ import (
 )
 
 func TestPlanUpgrade(t *testing.T) {
+	const (
+		templateDir       = "templateDir"
+		existingWorkspace = "existing"
+		backupDir         = "backup"
+		testFile          = "testfile"
+	)
+	fsWithWorkspace := func(require *require.Assertions) file.Handler {
+		fs := file.NewHandler(afero.NewMemMapFs())
+		require.NoError(fs.MkdirAll(existingWorkspace))
+		require.NoError(fs.Write(filepath.Join(existingWorkspace, testFile), []byte{}))
+		return fs
+	}
+
 	testCases := map[string]struct {
 		prepareFs func(require *require.Assertions) file.Handler
 		tf        *stubUpgradePlanner
@@ -26,51 +40,48 @@ func TestPlanUpgrade(t *testing.T) {
 		wantErr   bool
 	}{
 		"success no diff": {
-			prepareFs: func(require *require.Assertions) file.Handler {
-				return file.NewHandler(afero.NewMemMapFs())
-			},
-			tf: &stubUpgradePlanner{},
+			prepareFs: fsWithWorkspace,
+			tf:        &stubUpgradePlanner{},
 		},
 		"success diff": {
-			prepareFs: func(require *require.Assertions) file.Handler {
-				return file.NewHandler(afero.NewMemMapFs())
-			},
+			prepareFs: fsWithWorkspace,
 			tf: &stubUpgradePlanner{
 				planDiff: true,
 			},
 			wantDiff: true,
 		},
+		"workspace does not exist": {
+			prepareFs: func(require *require.Assertions) file.Handler {
+				return file.NewHandler(afero.NewMemMapFs())
+			},
+			tf:      &stubUpgradePlanner{},
+			wantErr: true,
+		},
 		"workspace not clean": {
 			prepareFs: func(require *require.Assertions) file.Handler {
-				fs := file.NewHandler(afero.NewMemMapFs())
-				require.NoError(fs.MkdirAll("backup"))
+				fs := fsWithWorkspace(require)
+				require.NoError(fs.MkdirAll(backupDir))
 				return fs
 			},
 			tf:      &stubUpgradePlanner{},
 			wantErr: true,
 		},
 		"prepare workspace error": {
-			prepareFs: func(require *require.Assertions) file.Handler {
-				return file.NewHandler(afero.NewMemMapFs())
-			},
+			prepareFs: fsWithWorkspace,
 			tf: &stubUpgradePlanner{
 				prepareWorkspaceErr: assert.AnError,
 			},
 			wantErr: true,
 		},
 		"plan error": {
-			prepareFs: func(require *require.Assertions) file.Handler {
-				return file.NewHandler(afero.NewMemMapFs())
-			},
+			prepareFs: fsWithWorkspace,
 			tf: &stubUpgradePlanner{
 				planErr: assert.AnError,
 			},
 			wantErr: true,
 		},
 		"show plan error": {
-			prepareFs: func(require *require.Assertions) file.Handler {
-				return file.NewHandler(afero.NewMemMapFs())
-			},
+			prepareFs: fsWithWorkspace,
 			tf: &stubUpgradePlanner{
 				planDiff:    true,
 				showPlanErr: assert.AnError,
@@ -87,7 +98,7 @@ func TestPlanUpgrade(t *testing.T) {
 			hasDiff, err := planUpgrade(
 				context.Background(), tc.tf, fs, io.Discard, terraform.LogLevelDebug,
 				&terraform.QEMUVariables{},
-				"test", "backup",
+				templateDir, existingWorkspace, backupDir,
 			)
 			if tc.wantErr {
 				assert.Error(err)
@@ -95,6 +106,8 @@ func TestPlanUpgrade(t *testing.T) {
 			}
 			assert.NoError(err)
 			assert.Equal(tc.wantDiff, hasDiff)
+			_, err = fs.Stat(filepath.Join(backupDir, testFile))
+			assert.NoError(err)
 		})
 	}
 }
@@ -208,7 +221,7 @@ type stubUpgradePlanner struct {
 	showPlanErr         error
 }
 
-func (s *stubUpgradePlanner) PrepareUpgradeWorkspace(_, _ string, _ terraform.Variables) error {
+func (s *stubUpgradePlanner) PrepareWorkspace(_ string, _ terraform.Variables) error {
 	return s.prepareWorkspaceErr
 }
 
diff --git a/cli/internal/cmd/create.go b/cli/internal/cmd/create.go
index 6f92c18de..bdfc991de 100644
--- a/cli/internal/cmd/create.go
+++ b/cli/internal/cmd/create.go
@@ -12,9 +12,7 @@ import (
 	"io/fs"
 
 	"github.com/edgelesssys/constellation/v2/cli/internal/cloudcmd"
-	"github.com/edgelesssys/constellation/v2/cli/internal/cmd/pathprefix"
 	"github.com/edgelesssys/constellation/v2/cli/internal/state"
-	"github.com/edgelesssys/constellation/v2/cli/internal/terraform"
 	"github.com/edgelesssys/constellation/v2/internal/api/attestationconfigapi"
 	"github.com/edgelesssys/constellation/v2/internal/api/versionsapi"
 	"github.com/edgelesssys/constellation/v2/internal/attestation/variant"
@@ -187,7 +185,7 @@ func (c *createCmd) create(cmd *cobra.Command, creator cloudCreator, fileHandler
 	infraState, err := creator.Create(cmd.Context(), opts)
 	spinner.Stop()
 	if err != nil {
-		return translateCreateErrors(cmd, c.flags.pathPrefixer, err)
+		return err
 	}
 	c.log.Debugf("Successfully created the cloud resources for the cluster")
 
@@ -220,31 +218,17 @@ func (c *createCmd) checkDirClean(fileHandler file.Handler) error {
 			c.flags.pathPrefixer.PrefixPrintablePath(constants.MasterSecretFilename),
 		)
 	}
+	c.log.Debugf("Checking Terraform working directory")
+	if _, err := fileHandler.Stat(constants.TerraformWorkingDir); !errors.Is(err, fs.ErrNotExist) {
+		return fmt.Errorf(
+			"directory '%s' already exists in working directory, run 'constellation terminate' before creating a new one",
+			c.flags.pathPrefixer.PrefixPrintablePath(constants.TerraformWorkingDir),
+		)
+	}
 
 	return nil
 }
 
-func translateCreateErrors(cmd *cobra.Command, pf pathprefix.PathPrefixer, err error) error {
-	switch {
-	case errors.Is(err, terraform.ErrTerraformWorkspaceDifferentFiles):
-		cmd.PrintErrln("\nYour current working directory contains an existing Terraform workspace which does not match the expected state.")
-		cmd.PrintErrln("This can be due to a mix up between providers, versions or an otherwise corrupted workspace.")
-		cmd.PrintErrln("Before creating a new cluster, try \"constellation terminate\".")
-		cmd.PrintErrf("If this does not work, either move or delete the directory %q.\n", pf.PrefixPrintablePath(constants.TerraformWorkingDir))
-		cmd.PrintErrln("Please only delete the directory if you made sure that all created cloud resources have been terminated.")
-		return err
-	case errors.Is(err, terraform.ErrTerraformWorkspaceExistsWithDifferentVariables):
-		cmd.PrintErrln("\nYour current working directory contains an existing Terraform workspace which was initiated with different input variables.")
-		cmd.PrintErrln("This can be the case if you have tried to create a cluster before with different options which did not complete, or the workspace is corrupted.")
-		cmd.PrintErrln("Before creating a new cluster, try \"constellation terminate\".")
-		cmd.PrintErrf("If this does not work, either move or delete the directory %q.\n", pf.PrefixPrintablePath(constants.TerraformWorkingDir))
-		cmd.PrintErrln("Please only delete the directory if you made sure that all created cloud resources have been terminated.")
-		return err
-	default:
-		return err
-	}
-}
-
 func isPlural(count int) string {
 	if count == 1 {
 		return ""
diff --git a/cli/internal/cmd/create_test.go b/cli/internal/cmd/create_test.go
index 22216c7d6..ec478acde 100644
--- a/cli/internal/cmd/create_test.go
+++ b/cli/internal/cmd/create_test.go
@@ -184,28 +184,26 @@ func TestCreate(t *testing.T) {
 
 func TestCheckDirClean(t *testing.T) {
 	testCases := map[string]struct {
-		fileHandler   file.Handler
 		existingFiles []string
 		wantErr       bool
 	}{
-		"no file exists": {
-			fileHandler: file.NewHandler(afero.NewMemMapFs()),
-		},
+		"no file exists": {},
 		"adminconf exists": {
-			fileHandler:   file.NewHandler(afero.NewMemMapFs()),
 			existingFiles: []string{constants.AdminConfFilename},
 			wantErr:       true,
 		},
 		"master secret exists": {
-			fileHandler:   file.NewHandler(afero.NewMemMapFs()),
 			existingFiles: []string{constants.MasterSecretFilename},
 			wantErr:       true,
 		},
 		"multiple exist": {
-			fileHandler:   file.NewHandler(afero.NewMemMapFs()),
 			existingFiles: []string{constants.AdminConfFilename, constants.MasterSecretFilename},
 			wantErr:       true,
 		},
+		"terraform dir exists": {
+			existingFiles: []string{constants.TerraformWorkingDir},
+			wantErr:       true,
+		},
 	}
 
 	for name, tc := range testCases {
@@ -213,11 +211,12 @@ func TestCheckDirClean(t *testing.T) {
 			assert := assert.New(t)
 			require := require.New(t)
 
+			fh := file.NewHandler(afero.NewMemMapFs())
 			for _, f := range tc.existingFiles {
-				require.NoError(tc.fileHandler.Write(f, []byte{1, 2, 3}, file.OptNone))
+				require.NoError(fh.Write(f, []byte{1, 2, 3}, file.OptNone))
 			}
 			c := &createCmd{log: logger.NewTest(t)}
-			err := c.checkDirClean(tc.fileHandler)
+			err := c.checkDirClean(fh)
 
 			if tc.wantErr {
 				assert.Error(err)
diff --git a/cli/internal/terraform/loader.go b/cli/internal/terraform/loader.go
index 092bf28c6..7ab5436f3 100644
--- a/cli/internal/terraform/loader.go
+++ b/cli/internal/terraform/loader.go
@@ -7,10 +7,8 @@ SPDX-License-Identifier: AGPL-3.0-only
 package terraform
 
 import (
-	"bytes"
 	"embed"
 	"errors"
-	"fmt"
 	"io/fs"
 	slashpath "path"
 	"path/filepath"
@@ -20,44 +18,19 @@ import (
 	"github.com/spf13/afero"
 )
 
-// ErrTerraformWorkspaceDifferentFiles is returned when a re-used existing Terraform workspace has different files than the ones to be extracted (e.g. due to a version mix-up or incomplete writes).
-var ErrTerraformWorkspaceDifferentFiles = errors.New("creating cluster: trying to overwrite an existing Terraform file with a different version")
-
 //go:embed terraform/*
 //go:embed terraform/*/.terraform.lock.hcl
 //go:embed terraform/iam/*/.terraform.lock.hcl
 var terraformFS embed.FS
 
-const (
-	noOverwrites overwritePolicy = iota
-	allowOverwrites
-)
-
-type overwritePolicy int
-
 // prepareWorkspace loads the embedded Terraform files,
 // and writes them into the workspace.
 func prepareWorkspace(rootDir string, fileHandler file.Handler, workingDir string) error {
-	return terraformCopier(fileHandler, rootDir, workingDir, noOverwrites)
-}
-
-// prepareUpgradeWorkspace backs up the old Terraform workspace from workingDir, and
-// copies the embedded Terraform files into workingDir.
-func prepareUpgradeWorkspace(rootDir string, fileHandler file.Handler, workingDir, backupDir string) error {
-	// backup old workspace
-	if err := fileHandler.CopyDir(
-		workingDir,
-		backupDir,
-	); err != nil {
-		return fmt.Errorf("backing up old workspace: %w", err)
-	}
-
-	return terraformCopier(fileHandler, rootDir, workingDir, allowOverwrites)
+	return terraformCopier(fileHandler, rootDir, workingDir)
 }
 
 // terraformCopier copies the embedded Terraform files into the workspace.
-// allowOverwrites allows overwriting existing files in the workspace.
-func terraformCopier(fileHandler file.Handler, rootDir, workingDir string, overwritePolicy overwritePolicy) error {
+func terraformCopier(fileHandler file.Handler, rootDir, workingDir string) error {
 	goEmbedRootDir := filepath.ToSlash(rootDir)
 	return fs.WalkDir(terraformFS, goEmbedRootDir, func(path string, d fs.DirEntry, err error) error {
 		if err != nil {
@@ -76,29 +49,14 @@ func terraformCopier(fileHandler file.Handler, rootDir, workingDir string, overw
 		fileName := strings.Replace(slashpath.Join(workingDir, path), goEmbedRootDir+"/", "", 1)
 		opts := []file.Option{
 			file.OptMkdirAll,
+			// Allow overwriting existing files.
+			// If we are creating a new cluster, the workspace must have been empty before,
+			// so there is no risk of overwriting existing files.
+			// If we are upgrading an existing cluster, we want to overwrite the existing files,
+			// and we have already created a backup of the existing workspace.
+			file.OptOverwrite,
 		}
-		if overwritePolicy == allowOverwrites {
-			opts = append(opts, file.OptOverwrite)
-		}
-		if err := fileHandler.Write(fileName, content, opts...); errors.Is(err, afero.ErrFileExists) {
-			// If a file already exists and overwritePolicy is set to noOverwrites,
-			// check if it is identical. If yes, continue and don't write anything to disk.
-			// If no, don't overwrite it and instead throw an error. The affected file could be from a different version,
-			// provider, corrupted or manually modified in general.
-			existingFileContent, err := fileHandler.Read(fileName)
-			if err != nil {
-				return err
-			}
-
-			if !bytes.Equal(content, existingFileContent) {
-				return ErrTerraformWorkspaceDifferentFiles
-			}
-			return nil
-		} else if err != nil {
-			return err
-		}
-
-		return nil
+		return fileHandler.Write(fileName, content, opts...)
 	})
 }
 
diff --git a/cli/internal/terraform/loader_test.go b/cli/internal/terraform/loader_test.go
index 3d1b0dcc0..4734bba1d 100644
--- a/cli/internal/terraform/loader_test.go
+++ b/cli/internal/terraform/loader_test.go
@@ -14,14 +14,13 @@ import (
 	"testing"
 
 	"github.com/edgelesssys/constellation/v2/internal/cloud/cloudprovider"
+	"github.com/edgelesssys/constellation/v2/internal/constants"
 	"github.com/edgelesssys/constellation/v2/internal/file"
 	"github.com/spf13/afero"
 	"github.com/stretchr/testify/assert"
 	"github.com/stretchr/testify/require"
 )
 
-var oldFileContent = []byte("1234")
-
 func TestPrepareWorkspace(t *testing.T) {
 	testCases := map[string]struct {
 		pathBase            string
@@ -30,7 +29,7 @@ func TestPrepareWorkspace(t *testing.T) {
 		testAlreadyUnpacked bool
 	}{
 		"awsCluster": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.AWS,
 			fileList: []string{
 				"main.tf",
@@ -40,7 +39,7 @@ func TestPrepareWorkspace(t *testing.T) {
 			},
 		},
 		"gcpCluster": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.GCP,
 			fileList: []string{
 				"main.tf",
@@ -50,7 +49,7 @@ func TestPrepareWorkspace(t *testing.T) {
 			},
 		},
 		"qemuCluster": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			fileList: []string{
 				"main.tf",
@@ -60,7 +59,7 @@ func TestPrepareWorkspace(t *testing.T) {
 			},
 		},
 		"gcpIAM": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			fileList: []string{
 				"main.tf",
@@ -69,7 +68,7 @@ func TestPrepareWorkspace(t *testing.T) {
 			},
 		},
 		"azureIAM": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			fileList: []string{
 				"main.tf",
@@ -78,7 +77,7 @@ func TestPrepareWorkspace(t *testing.T) {
 			},
 		},
 		"awsIAM": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			fileList: []string{
 				"main.tf",
@@ -87,7 +86,7 @@ func TestPrepareWorkspace(t *testing.T) {
 			},
 		},
 		"continue on (partially) unpacked": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.AWS,
 			fileList: []string{
 				"main.tf",
@@ -129,97 +128,6 @@ func TestPrepareWorkspace(t *testing.T) {
 	}
 }
 
-func TestPrepareUpgradeWorkspace(t *testing.T) {
-	testCases := map[string]struct {
-		pathBase            string
-		provider            cloudprovider.Provider
-		workingDir          string
-		backupDir           string
-		workspaceFiles      []string
-		expectedFiles       []string
-		expectedBackupFiles []string
-		testAlreadyUnpacked bool
-		wantErr             bool
-	}{
-		"works": {
-			pathBase:       "terraform",
-			provider:       cloudprovider.AWS,
-			workingDir:     "working",
-			backupDir:      "backup",
-			workspaceFiles: []string{"main.tf", "variables.tf", "outputs.tf"},
-			expectedFiles: []string{
-				"main.tf",
-				"variables.tf",
-				"outputs.tf",
-			},
-			expectedBackupFiles: []string{
-				"main.tf",
-				"variables.tf",
-				"outputs.tf",
-			},
-		},
-		"state file does not exist": {
-			pathBase:       "terraform",
-			provider:       cloudprovider.AWS,
-			workingDir:     "working",
-			backupDir:      "backup",
-			workspaceFiles: []string{},
-			expectedFiles:  []string{},
-			wantErr:        true,
-		},
-		"terraform file already exists in working dir (overwrite)": {
-			pathBase:       "terraform",
-			provider:       cloudprovider.AWS,
-			workingDir:     "working",
-			backupDir:      "backup",
-			workspaceFiles: []string{"main.tf", "variables.tf", "outputs.tf"},
-			expectedFiles: []string{
-				"main.tf",
-				"variables.tf",
-				"outputs.tf",
-			},
-			expectedBackupFiles: []string{
-				"main.tf",
-				"variables.tf",
-				"outputs.tf",
-			},
-		},
-	}
-
-	for name, tc := range testCases {
-		t.Run(name, func(t *testing.T) {
-			require := require.New(t)
-			assert := assert.New(t)
-
-			file := file.NewHandler(afero.NewMemMapFs())
-
-			path := path.Join(tc.pathBase, strings.ToLower(tc.provider.String()))
-
-			createFiles(t, file, tc.workspaceFiles, tc.workingDir)
-
-			err := prepareUpgradeWorkspace(path, file, tc.workingDir, tc.backupDir)
-
-			if tc.wantErr {
-				require.Error(err)
-			} else {
-				require.NoError(err)
-				checkFiles(
-					t, file,
-					func(err error) { assert.NoError(err) },
-					func(content []byte) { assert.NotEqual(oldFileContent, content) },
-					tc.workingDir, tc.expectedFiles,
-				)
-				checkFiles(
-					t, file,
-					func(err error) { assert.NoError(err) },
-					func(content []byte) { assert.Equal(oldFileContent, content) },
-					tc.backupDir, tc.expectedBackupFiles,
-				)
-			}
-		})
-	}
-}
-
 func checkFiles(t *testing.T, fileHandler file.Handler, assertion func(error), contentExpection func(content []byte), dir string, files []string) {
 	t.Helper()
 	for _, f := range files {
@@ -235,14 +143,3 @@ func checkFiles(t *testing.T, fileHandler file.Handler, assertion func(error), c
 		}
 	}
 }
-
-func createFiles(t *testing.T, fileHandler file.Handler, fileList []string, targetDir string) {
-	t.Helper()
-	require := require.New(t)
-
-	for _, f := range fileList {
-		path := filepath.Join(targetDir, f)
-		err := fileHandler.Write(path, oldFileContent, file.OptOverwrite, file.OptMkdirAll)
-		require.NoError(err)
-	}
-}
diff --git a/cli/internal/terraform/terraform.go b/cli/internal/terraform/terraform.go
index d54049b79..59d563a75 100644
--- a/cli/internal/terraform/terraform.go
+++ b/cli/internal/terraform/terraform.go
@@ -9,7 +9,7 @@ Package terraform handles creation/destruction of cloud and IAM resources requir
 
 Since Terraform does not provide a stable Go API, we use the `terraform-exec` package to interact with Terraform.
 
-The Terraform templates are located in the "terraform" subdirectory. The templates are embedded into the CLI binary using `go:embed`.
+The Terraform templates are located in the constants.TerraformEmbeddedDir subdirectory. The templates are embedded into the CLI binary using `go:embed`.
 On use the relevant template is extracted to the working directory and the user customized variables are written to a `terraform.tfvars` file.
 
 Functions in this package should be kept CSP agnostic (there should be no "CreateAzureCluster" function),
@@ -48,9 +48,6 @@ const (
 	terraformUpgradePlanFile = "plan.zip"
 )
 
-// ErrTerraformWorkspaceExistsWithDifferentVariables is returned when existing Terraform files differ from the version the CLI wants to extract.
-var ErrTerraformWorkspaceExistsWithDifferentVariables = errors.New("creating cluster: a Terraform workspace already exists with different variables")
-
 // Client manages interaction with Terraform.
 type Client struct {
 	tf tfInterface
@@ -353,18 +350,7 @@ func (c *Client) PrepareWorkspace(path string, vars Variables) error {
 		return fmt.Errorf("prepare workspace: %w", err)
 	}
 
-	return c.writeVars(vars, noOverwrites)
-}
-
-// PrepareUpgradeWorkspace prepares a Terraform workspace for an upgrade.
-// It creates a backup of the Terraform workspace in the backupDir, and copies
-// the embedded Terraform files into the workingDir.
-func (c *Client) PrepareUpgradeWorkspace(path, backupDir string, vars Variables) error {
-	if err := prepareUpgradeWorkspace(path, c.file, c.workingDir, backupDir); err != nil {
-		return fmt.Errorf("prepare upgrade workspace: %w", err)
-	}
-
-	return c.writeVars(vars, allowOverwrites)
+	return c.writeVars(vars)
 }
 
 // ApplyCluster applies the Terraform configuration of the workspace to create or upgrade a Constellation cluster.
@@ -480,27 +466,20 @@ func (c *Client) applyManualStateMigrations(ctx context.Context) error {
 	return nil
 }
 
-// writeVars tries to write the Terraform variables file or, if it exists, checks if it is the same as we are expecting.
-func (c *Client) writeVars(vars Variables, overwritePolicy overwritePolicy) error {
+// writeVars writes / overwrites the Terraform variables file.
+func (c *Client) writeVars(vars Variables) error {
 	if vars == nil {
 		return errors.New("creating cluster: vars is nil")
 	}
 
 	pathToVarsFile := filepath.Join(c.workingDir, terraformVarsFile)
-	opts := []file.Option{}
-	if overwritePolicy == allowOverwrites {
-		opts = append(opts, file.OptOverwrite)
-	}
-	if err := c.file.Write(pathToVarsFile, []byte(vars.String()), opts...); errors.Is(err, afero.ErrFileExists) {
-		// If a variables file already exists, check if it's the same as we're expecting, so we can continue using it.
-		varsContent, err := c.file.Read(pathToVarsFile)
-		if err != nil {
-			return fmt.Errorf("read variables file: %w", err)
-		}
-		if vars.String() != string(varsContent) {
-			return ErrTerraformWorkspaceExistsWithDifferentVariables
-		}
-	} else if err != nil {
+
+	// Allow overwriting existing files.
+	// If we are creating a new cluster, the workspace must have been empty before,
+	// so there is no risk of overwriting existing files.
+	// If we are upgrading an existing cluster, we want to overwrite the existing files,
+	// and we have already created a backup of the existing workspace.
+	if err := c.file.Write(pathToVarsFile, []byte(vars.String()), file.OptOverwrite); err != nil {
 		return fmt.Errorf("write variables file: %w", err)
 	}
 
diff --git a/cli/internal/terraform/terraform_test.go b/cli/internal/terraform/terraform_test.go
index 4574e80a1..0f8cddc1a 100644
--- a/cli/internal/terraform/terraform_test.go
+++ b/cli/internal/terraform/terraform_test.go
@@ -56,20 +56,20 @@ func TestPrepareCluster(t *testing.T) {
 		wantErr            bool
 	}{
 		"qemu": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			fs:       afero.NewMemMapFs(),
 			wantErr:  false,
 		},
 		"no vars": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			fs:       afero.NewMemMapFs(),
 			wantErr:  true,
 		},
 		"continue on partially extracted": {
-			pathBase:           "terraform",
+			pathBase:           constants.TerraformEmbeddedDir,
 			provider:           cloudprovider.QEMU,
 			vars:               qemuVars,
 			fs:                 afero.NewMemMapFs(),
@@ -77,7 +77,7 @@ func TestPrepareCluster(t *testing.T) {
 			wantErr:            false,
 		},
 		"prepare workspace fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			fs:       afero.NewReadOnlyFs(afero.NewMemMapFs()),
@@ -138,7 +138,7 @@ func TestPrepareIAM(t *testing.T) {
 		wantErr            bool
 	}{
 		"no vars": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			fs:       afero.NewMemMapFs(),
 			wantErr:  true,
 		},
@@ -148,14 +148,14 @@ func TestPrepareIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"gcp": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			fs:       afero.NewMemMapFs(),
 			wantErr:  false,
 		},
 		"continue on partially extracted": {
-			pathBase:           path.Join("terraform", "iam"),
+			pathBase:           path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider:           cloudprovider.GCP,
 			vars:               gcpVars,
 			fs:                 afero.NewMemMapFs(),
@@ -163,14 +163,14 @@ func TestPrepareIAM(t *testing.T) {
 			wantErr:            false,
 		},
 		"azure": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			fs:       afero.NewMemMapFs(),
 			wantErr:  false,
 		},
 		"aws": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			fs:       afero.NewMemMapFs(),
@@ -315,14 +315,14 @@ func TestCreateCluster(t *testing.T) {
 		wantErr                bool
 	}{
 		"works": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf:       &stubTerraform{showState: newQEMUState()},
 			fs:       afero.NewMemMapFs(),
 		},
 		"init fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf:       &stubTerraform{initErr: assert.AnError},
@@ -330,7 +330,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr:  true,
 		},
 		"apply fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf:       &stubTerraform{applyErr: assert.AnError},
@@ -338,7 +338,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr:  true,
 		},
 		"show fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf:       &stubTerraform{showErr: assert.AnError},
@@ -346,7 +346,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr:  true,
 		},
 		"set log fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf:       &stubTerraform{setLogErr: assert.AnError},
@@ -354,7 +354,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr:  true,
 		},
 		"set log path fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf:       &stubTerraform{setLogPathErr: assert.AnError},
@@ -362,7 +362,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr:  true,
 		},
 		"no ip": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf: &stubTerraform{
@@ -376,7 +376,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr: true,
 		},
 		"ip has wrong type": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf: &stubTerraform{
@@ -390,7 +390,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr: true,
 		},
 		"no uid": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf: &stubTerraform{
@@ -404,7 +404,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr: true,
 		},
 		"uid has wrong type": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf: &stubTerraform{
@@ -418,7 +418,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr: true,
 		},
 		"name has wrong type": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.QEMU,
 			vars:     qemuVars,
 			tf: &stubTerraform{
@@ -432,7 +432,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr: true,
 		},
 		"working attestation url": {
-			pathBase:               "terraform",
+			pathBase:               constants.TerraformEmbeddedDir,
 			provider:               cloudprovider.Azure,
 			vars:                   qemuVars, // works for mocking azure vars
 			tf:                     &stubTerraform{showState: newAzureState()},
@@ -440,7 +440,7 @@ func TestCreateCluster(t *testing.T) {
 			expectedAttestationURL: "https://12345.neu.attest.azure.net",
 		},
 		"no attestation url": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.Azure,
 			vars:     qemuVars, // works for mocking azure vars
 			tf: &stubTerraform{
@@ -454,7 +454,7 @@ func TestCreateCluster(t *testing.T) {
 			wantErr: true,
 		},
 		"attestation url has wrong type": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			provider: cloudprovider.Azure,
 			vars:     qemuVars, // works for mocking azure vars
 			tf: &stubTerraform{
@@ -560,7 +560,7 @@ func TestCreateIAM(t *testing.T) {
 		want     IAMOutput
 	}{
 		"set log fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf:       &stubTerraform{setLogErr: assert.AnError},
@@ -568,7 +568,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"set log path fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf:       &stubTerraform{setLogPathErr: assert.AnError},
@@ -576,7 +576,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"gcp works": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf:       &stubTerraform{showState: newTestState()},
@@ -584,7 +584,7 @@ func TestCreateIAM(t *testing.T) {
 			want:     IAMOutput{GCP: GCPIAMOutput{SaKey: "12345678_abcdefg"}},
 		},
 		"gcp init fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf:       &stubTerraform{initErr: assert.AnError},
@@ -592,7 +592,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"gcp apply fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf:       &stubTerraform{applyErr: assert.AnError},
@@ -600,7 +600,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"gcp show fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf:       &stubTerraform{showErr: assert.AnError},
@@ -608,7 +608,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"gcp no sa_key": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf: &stubTerraform{
@@ -622,7 +622,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr: true,
 		},
 		"gcp sa_key has wrong type": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.GCP,
 			vars:     gcpVars,
 			tf: &stubTerraform{
@@ -636,7 +636,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr: true,
 		},
 		"azure works": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			tf:       &stubTerraform{showState: newTestState()},
@@ -648,7 +648,7 @@ func TestCreateIAM(t *testing.T) {
 			}},
 		},
 		"azure init fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			tf:       &stubTerraform{initErr: assert.AnError},
@@ -656,7 +656,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"azure apply fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			tf:       &stubTerraform{applyErr: assert.AnError},
@@ -664,7 +664,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"azure show fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			tf:       &stubTerraform{showErr: assert.AnError},
@@ -672,7 +672,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"azure no subscription_id": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			tf: &stubTerraform{
@@ -686,7 +686,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr: true,
 		},
 		"azure subscription_id has wrong type": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.Azure,
 			vars:     azureVars,
 			tf: &stubTerraform{
@@ -700,7 +700,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr: true,
 		},
 		"aws works": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			tf:       &stubTerraform{showState: newTestState()},
@@ -711,7 +711,7 @@ func TestCreateIAM(t *testing.T) {
 			}},
 		},
 		"aws init fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			tf:       &stubTerraform{initErr: assert.AnError},
@@ -719,7 +719,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"aws apply fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			tf:       &stubTerraform{applyErr: assert.AnError},
@@ -727,7 +727,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"aws show fails": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			tf:       &stubTerraform{showErr: assert.AnError},
@@ -735,7 +735,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr:  true,
 		},
 		"aws no control_plane_instance_profile": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			tf: &stubTerraform{
@@ -749,7 +749,7 @@ func TestCreateIAM(t *testing.T) {
 			wantErr: true,
 		},
 		"azure control_plane_instance_profile has wrong type": {
-			pathBase: path.Join("terraform", "iam"),
+			pathBase: path.Join(constants.TerraformEmbeddedDir, "iam"),
 			provider: cloudprovider.AWS,
 			vars:     awsVars,
 			tf: &stubTerraform{
@@ -1003,12 +1003,12 @@ func TestPlan(t *testing.T) {
 		wantErr  bool
 	}{
 		"plan succeeds": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf:       &stubTerraform{},
 			fs:       afero.NewMemMapFs(),
 		},
 		"set log path fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				setLogPathErr: someError,
 			},
@@ -1016,7 +1016,7 @@ func TestPlan(t *testing.T) {
 			wantErr: true,
 		},
 		"set log fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				setLogErr: someError,
 			},
@@ -1024,7 +1024,7 @@ func TestPlan(t *testing.T) {
 			wantErr: true,
 		},
 		"plan fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				planJSONErr: someError,
 			},
@@ -1032,7 +1032,7 @@ func TestPlan(t *testing.T) {
 			wantErr: true,
 		},
 		"init fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				initErr: someError,
 			},
@@ -1070,12 +1070,12 @@ func TestShowPlan(t *testing.T) {
 		wantErr  bool
 	}{
 		"show plan succeeds": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf:       &stubTerraform{},
 			fs:       afero.NewMemMapFs(),
 		},
 		"set log path fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				setLogPathErr: someError,
 			},
@@ -1083,7 +1083,7 @@ func TestShowPlan(t *testing.T) {
 			wantErr: true,
 		},
 		"set log fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				setLogErr: someError,
 			},
@@ -1091,7 +1091,7 @@ func TestShowPlan(t *testing.T) {
 			wantErr: true,
 		},
 		"show plan file fails": {
-			pathBase: "terraform",
+			pathBase: constants.TerraformEmbeddedDir,
 			tf: &stubTerraform{
 				showPlanFileErr: someError,
 			},
diff --git a/internal/constants/constants.go b/internal/constants/constants.go
index 853c45dfd..f3a14e650 100644
--- a/internal/constants/constants.go
+++ b/internal/constants/constants.go
@@ -171,6 +171,8 @@ const (
 	TerraformUpgradeBackupDir = "terraform-backup"
 	// TerraformIAMUpgradeBackupDir is the directory name being used to backup the pre-upgrade state of iam in an upgrade.
 	TerraformIAMUpgradeBackupDir = "terraform-iam-backup"
+	// TerraformEmbeddedDir is the name of the base directory embedded in the CLI binary containing the Terraform files.
+	TerraformEmbeddedDir = "terraform"
 	// UpgradeDir is the name of the directory being used for cluster upgrades.
 	UpgradeDir = "constellation-upgrade"
 	// ControlPlaneDefault is the name of the default control plane worker group.