A Permanent Establishment (PE) problem can be triggered for companies and individuals unless the general principles of PE are understood. In this article, experts from Alliott Group's Global Mobility Services Group explain what PE is, the risks involved in sending staff across borders on short and long term assignments and the situations that can give rise to a PE issue in their countries.
Recently, international tax reforms have been developing fast, driven by numerous factors: the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS) initiative, local corporate tax reform initiatives, but also the concept of permanent establishment (PE).
What is permanent establishment?
Permanent establishment or 'PE' is one of the key principles used by tax authorities to claim jurisdiction over an organisation that is doing business on their patch which is therefore perceived to have created a taxable presence. The concept of PE is slightly ambiguous and failure to understand how and where it applies can be an expensive mistake. Recent tax reform has given local tax authorities the authority to investigate corporate structures and to re-categorize what some businesses may claim as auxiliary employee activities as direct sales employee activities which then become liable to local taxes.
Furthermore, what creates a PE varies from country to country under each jurisdiction's local tax rules. In general however, PE is judged to exist if an activity carried out by a business in a country results in revenue being generated or value created.
Read the full article [link to https://www.alliottgroup.net/practice-management-resources-for-owner-managed-firms/permanent-establishment-risks-international-assignees/]
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.