Permanent Establishment

Permanent establishment is a tax concept that decides whether a country can tax a foreign company’s profits because of activity happening on its soil. The classic example is an office, factory, branch, or building site. But it can also be triggered by a dependent agent who habitually signs contracts for the company, or by services performed locally for long enough.

This matters the moment you move countries while running a business. If you are the director or a key employee, the place where you actually work and make decisions can create a PE for your company there — even if the company is registered somewhere else. In practice that can mean a slice of the company’s profit becomes taxable in your new country, plus local filing and registration duties.

Here’s the catch people miss: “working from a laptop” is not automatically safe. A home office where you sign deals, manage staff, or run the core business can be enough, depending on the country and the relevant tax treaty. Thresholds vary a lot — time spent, type of activity, who holds the authority — and they shift from one jurisdiction and treaty to the next. Some treaties carve out purely preparatory or auxiliary work; many do nothing to protect active management. All of this ties straight back to your own Tax Residency and, if you own a foreign company, to Controlled Foreign Company (CFC) Rules.

A common scenario is a solo founder with a US LLC who relocates and keeps running everything personally — the LLC may now have a PE (or effective management) in the new country, regardless of its US paperwork. If you are weighing where to base a company before you move, the where to incorporate tool can help you compare options. This is general information, not advice — confirm with the official source or a qualified professional before you rely on it.

Where you’ll meet this

• A tax adviser asks where the company’s directors physically work and sign contracts before signing off on your move.
• Your accountant flags that your home office abroad may create a taxable presence for your existing company.
• A bank or corporate registry in your new country asks whether your foreign company should register locally and file returns.