The concept of permanent establishment (PE) and how it applies in your situation
The permanent establishment (PE) is a tax concept that designates a permanent installation of a company in a foreign country, which is used to carry out an economic activity. A PE can take the form of a branch, subsidiary, office, store, factory, etc.
What are the criteria for determining whether a facility is a permanent establishment?
To determine whether a facility is considered a permanent establishment, the tax authorities consider the following criteria:
- eastPermanent: The facility must be permanent and not temporary.
- eastEconomic activity: The facility must be used to carry out an economic activity, such as production, sales, distribution, etc.
- eastAutonomy: The facility must have a certain degree of autonomy to make decisions and carry out activities without being directly dependent on the parent company.
- eastPersonnel: The facility must have permanent and not temporary staff.
How does permanent establishment apply in your situation?
If you have a permanent installation in a foreign country, which is used to carry out an economic activity, you must declare this installation as a permanent establishment. You must also declare the income and assets of this facility in the country where it is located.
What are the advantages and disadvantages of a permanent establishment?
The advantages of a permanent establishment are :
- eastEasier taxation: The permanent establishment facilitates the taxation of income and assets in the country where the facility is located.
- eastEnables tax cooperation: The permanent establishment enables tax cooperation between countries, facilitating the exchange of information and the fight against tax fraud.
The disadvantages of a permanent establishment are :
- eastCreates tax obligations: The permanent establishment creates tax obligations for the company, including the declaration of income and assets.
- eastCreates costs: The permanent establishment may create costs for the company, including operating and personnel costs.
In summary, a permanent establishment is a tax concept that refers to a company's permanent installation in a foreign country, which is used to carry out an economic activity. The advantages and disadvantages of a permanent establishment include the facilitation of taxation and tax cooperation, but also the creation of tax obligations and costs.
