Permanent Establishment (PE)
Category: tax
A fixed place of business that triggers corporate tax obligations in a foreign country.
A permanent establishment (PE) is a fixed place of business through which an enterprise carries on its business in another country, triggering corporate income tax obligations in that jurisdiction. PE can arise from an office, warehouse, or dependent agent. For cross-border e-commerce, storing inventory in an FBA warehouse may create a PE in some countries, although tax treaty interpretations vary.
Examples
- • A US company using Amazon FBA warehouses in Germany may create a permanent establishment for German corporate income tax purposes.
- • Having a dependent sales agent who regularly concludes contracts on behalf of a foreign seller can create a PE under most tax treaties.
- • The OECD BEPS framework has expanded PE definitions, potentially affecting e-commerce sellers with local fulfillment operations.