Permanent Establishment — When Activity Abroad Creates a Tax Presence
A permanent establishment (PE) is a taxable presence a company can create in another country through its activities there. For founders running a company across borders, an unintended PE can pull profits into a second tax net.
What it is
A PE is typically a fixed place of business — an office, branch, or sometimes a dependent agent — through which a company carries on business in another country.
How it is triggered
Thresholds vary, but a physical location, employees acting on the company's behalf, or significant local activity can each create a PE under domestic law and tax treaties.
Why founders care
A PE can make part of a company's profit taxable in a second country, adding filings and the need to allocate income. Remote and travelling founders should watch where work actually happens.
FAQ
- Can working from another country create a permanent establishment?
- It can, depending on what is done there and for how long. PE rules turn on facts and treaties, so cross-border setups often warrant advice. This is informational only.
- Is a permanent establishment the same as a subsidiary?
- No. A subsidiary is a separate company; a permanent establishment is a taxable presence of the same company in another country.
Related
Sources
- OECD — OECD — economic and tax statistics (accessed ; reviewed )Covers: Comparable corporate tax, statutory rate, and economic indicators across member and partner economies.Does not cover: Effective tax rates, deductions and incentives, local surtaxes, and personal residency rules.Why it matters: Used as a cross-country baseline to sanity-check rates against primary tax-authority figures.Review cadence: Annual, plus on major statutory changes.
- PricewaterhouseCoopers — PwC Worldwide Tax Summaries (accessed ; reviewed )Covers: Corporate income tax, VAT, and dividend withholding rates across most covered jurisdictions.Does not cover: Your specific effective rate, bespoke incentives, rulings, or transactions requiring professional advice.Why it matters: Used to triangulate rates against primary tax-authority sources, not as the sole authority.Review cadence: Updated by the publisher per tax year; re-checked each data review.
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