Operations & compliance
Permanent establishment
A permanent establishment, or PE, is a fixed place of business or dependent agent presence that gives a country the right to tax profit attributable to activity carried out there, even where the group has not formally incorporated a local entity, and PE risk is closely tied to transfer pricing because attributed profit must.
Common PE triggers include employees habitually concluding contracts locally, a fixed office used for core business activity, or construction projects exceeding a time threshold, and remote and hybrid working arrangements have made PE risk considerably harder to manage since employees can create exposure without anyone.
Once a PE is identified, the harder question is usually how much profit to attribute to it, which requires a functional analysis similar to standard transfer pricing work, assessing what functions, assets and risks the PE effectively carries compared with the rest of the enterprise it forms part of. This matters in practice.
In practice
What matters when applying permanent establishment
- Monitor employee activity for PE triggers
- Watch construction and project time thresholds
- Assess remote working PE exposure regularly
- Apply functional analysis to attribute profit
- Coordinate PE and transfer pricing teams
Frequently asked
Common questions
What commonly creates a permanent establishment?+
Employees habitually concluding contracts in a country, a fixed place of business used for core activity, or long-running construction projects are the most common PE triggers. This matters in practice.
How is profit attributed to a permanent establishment?+
Profit attribution uses a functional analysis similar to transfer pricing, assessing what functions, assets and risks the PE actually carries relative to the rest of the enterprise.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.