Permanent Establishment (PE) Concerns | Shift by MLegal
Permanent Establishment (PE) Concerns
As global operations become increasingly digital, mobile, and decentralised, Permanent Establishment (PE) has emerged as one of the most contentious issues in international taxation. At Shift by MLegal, we offer sophisticated advisory services to help clients identify, assess, mitigate, and defend against PE exposure across jurisdictions.
Whether you're running a sales team in a foreign country, licensing software globally, or outsourcing operations — there's a real risk you might create a taxable nexus (PE) without realising it, leading to tax liabilities, interest, and penalties.
What is Permanent Establishment (PE)?
PE refers to a fixed place of business or taxable presence of a foreign entity in a host country. Once a PE is triggered, the host country may claim the right to tax the foreign company’s profits attributable to its activities within that jurisdiction.
PE is commonly triggered by:
- Having a branch, office, or agent in the host country
- Employing dependent agents or personnel signing contracts locally
- Maintaining inventory, warehouses, or factories
- Rendering services on-site for extended periods
- Operating through a digital platform or server hosted in the host country
Types of PE
| Type | Description |
|---|---|
| Fixed Place PE | A physical location like an office, branch, or workshop |
| Agency PE | Triggered when agents act on behalf of the enterprise to close contracts |
| Service PE | Arises when services are rendered for a prolonged period on-site |
| Construction PE | Triggered by construction or installation projects crossing time thresholds |
| Digital/Virtual PE | Emerging concept based on significant economic presence (SEP), servers, etc. |
Our PE Risk Assessment & Advisory Services
| Area of Focus | Services Delivered |
|---|---|
| PE Exposure Diagnostics | Analysing whether your foreign operations trigger PE under DTAA and domestic laws |
| Substance Review | Ensuring your operations don’t cross PE thresholds inadvertently |
| Agency Structure Advisory | Structuring relationships to avoid dependent agent status |
| Contractual Risk Review | Revising sales, licensing, and service contracts to mitigate PE creation |
| Digital Business Structuring | Guidance on server location, IP ownership, and platform management |
| Attribution of Profits | Determining profits attributable to PE to prepare compliant returns |
| Audit Defence & MAP Assistance | Representing clients in PE-related audits, litigation, and mutual agreement procedures (MAPs) |
PE Regulations We Work With
- OECD Model Tax Convention and commentary (including BEPS Action 7)
- UN Model Double Taxation Convention (for service PE focus)
- Domestic tax laws across India, UAE, UK, Singapore, and EU countries
- BEPS & Multilateral Instrument (MLI) adopted by over 100 countries
- India’s Significant Economic Presence (SEP) concept under Sec 9 of IT Act
- Relevant MAP and APA frameworks for PE-related dispute resolution
Who Needs PE Risk Management?
- Digital-first businesses offering SaaS, e-commerce, or app-based services abroad
- Engineering & construction firms operating across borders
- Professional services firms (law, consulting, tech) with foreign personnel
- Multinational subsidiaries managing procurement or sales in other jurisdictions
- Logistics companies managing warehouses or fulfilment centres
- Investment platforms with financial presence in multiple countries
Case Examples
| Scenario | Outcome Secured |
|---|---|
| SaaS Platform (India ↔ EU) | Server hosting strategy adjusted to avoid Fixed Place PE |
| Logistics Company (UAE ↔ India) | Warehousing contract redesigned to avoid PE risk |
| Engineering Firm (India ↔ ME) | Construction PE time thresholds managed across projects |
| Software Services Group (UK ↔ US) | Employee deployment rotated to avoid exceeding service PE thresholds |
The Shift by MLegal Advantage
- Multidisciplinary expertise in tax, legal, and digital structuring
- PE risk mapping across over 15 countries, including treaty-based and domestic rules
- Defensible positions in case of audits or cross-border disputes
- Confidential, practical, and proactive structuring advice
- MAP and APA strategy to resolve PE issues without litigation
Don’t Let PE Catch You Off Guard
Permanent Establishment issues are one of the most misunderstood but aggressively pursued tax matters globally. Shift by MLegal ensures your business structure is PE-proof — or at least PE-ready.