Permanent Establishment

Definitions #

A fixed place of business that makes a foreign company taxable in another country.

Technical A taxable presence threshold under tax treaties, typically requiring a fixed place of business, construction site, or dependent agent conceiving core business activities.

Etymology #

From 'permanent' (lasting) and 'establishment' (a place set up for business), rooted in international tax law.

Collocations #

fixed place of business PE 固定营业场所型常设机构
agency PE 代理型常设机构，指有代理人代表企业签约

Real Business Examples #

A foreign company with a permanent establishment in Germany is subject to local corporate income tax on profits attributable to that PE.
The tax authority determined that the sales office constituted a permanent establishment under the OECD Model Tax Convention.

Register & Variants #

Register: formal
BrE/AmE: global

Synonyms & Antonyms #

Synonyms: PE, taxable presence

Common Errors #

Assuming that activities without a fixed office cannot create a PE. Agency PEs or services PEs may arise even without a fixed place, depending on the treaty and facts.

Confusable Terms #

Residence vs Permanent Establishment: Permanent establishment is a different concept: PE is a taxable presence in a source country, distinct from tax residence.

Frequently Asked Questions

Does a permanent establishment automatically exist if an employee works in a foreign country??

Not always; it depends on the nature of activities and the duration; short-term activities may not trigger PE.

What is a service PE??

Some treaties consider a PE when services are rendered for a certain number of days in a country, even without a fixed place.

Published: 2026-09-22 Category: Taxation