Permanent establishments

A company can have more than one tax connection

A permanent establishment is a concept used in domestic laws and tax treaties to identify certain business presences through which a foreign enterprise can be taxed. The applicable definition and consequences must be checked in the country concerned and, where available, the actual treaty.

Common questions involve a fixed place used for business, people habitually conducting relevant contract activity, and special construction or service provisions. Thresholds and exceptions differ. An enterprise can remain resident in one country while profits attributable to a presence elsewhere are taxable in another.

How the analysis fits together

A permanent establishment analysis is concerned with a business connection to a country, not merely the company’s registration. Start with premises, people and authority. A warehouse, home office, sales representative or project can raise different questions; their treatment depends on the domestic rules and applicable treaty. Physical presence should be described accurately before applying labels such as independent contractor or auxiliary activity.

If an establishment exists, a second analysis asks which profits are attributable to it. That is not necessarily all global revenue, and it is not necessarily zero because customer invoices are issued abroad. Separate profit attribution from local VAT, employment, payroll, licensing and registration obligations, which may arise under their own tests. The practical review should state which issues have actually been resolved.

Assessment sequence

This is a review framework. The applicable domestic provisions and any relevant treaty determine the result in a particular case.

Remote work needs a factual review

Consider a sales director living in country A for a company resident in B. Ask where the work occurs, how enduring the arrangement is, why that location is used, and what authority the director exercises. A home office and an office leased by the company can present different facts, but neither should be classified from its name alone.

The OECD’s November 2025 update expands commentary on when a person’s home or similar place can constitute an enterprise’s place of business. This is interpretative model guidance, not legislation that automatically rewrites every treaty. Check the relevant countries’ positions, treaty wording and domestic application.

Separate the taxes and registrations

A conclusion about income-tax permanent establishment does not settle VAT registration, payroll withholding, social contributions, immigration work rights or company-law registration. Those systems use their own tests. A business can need a local registration even when its income-tax treaty analysis is favourable.

Where a permanent establishment exists, determine which functions, assets and risks are attributable to it and how profits are measured. Taxing every global dollar of revenue is not the default analytical step. Conversely, allocating no profit to people performing valuable work also needs a defensible explanation.

Build a practical expansion checklist

Map staff, contractors, premises, inventory, travel and contract roles by country. Review proposed hires and relocations before they begin, with a process for changes in authority or working patterns. Keep commercial reasons and supporting records alongside the tax analysis.

We can assess an existing international footprint or plan a new one, then coordinate the entities, registrations and operating agreements required. For a founder, the objective is to let the business expand with clear responsibilities rather than discover an unpriced local obligation after the activity has grown.

Common misunderstandings

• A contractor label does not replace analysis of actual authority and activity.
• No permanent establishment under an income-tax treaty does not settle VAT or payroll.
• Remote work requires a factual and treaty-specific review, not an automatic yes/no answer.