Permanent Establishment (PE)

Definition

Permanent establishment is a tax treaty threshold that generally looks for a fixed place of business or other treaty-defined presence in the source country. It matters because many treaties limit source-country business profits taxation unless the nonresident enterprise has a PE there.

Examples

• A dependent agent with authority to conclude contracts may create a PE under some treaties.
• Construction sites often trigger a PE only if they last longer than the treaty's time threshold.