Glossary
Permanent Establishment
A permanent establishment (PE) is a fixed or substantial business presence in a country that lets that country tax part of a foreign company's profits, sometimes triggered just by where you work from.
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.
Related terms
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Where to Incorporate
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Tax-Residency Reality Checker
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Sources
- OECD Model Tax Convention on Income and on Capital, condensed version 2017, Article 5: definition of permanent establishment, including the preparatory or auxiliary exclusion
- OECD/G20 BEPS Action 7, 2015 Final Report: Preventing the Artificial Avoidance of Permanent Establishment Status
- HMRC International Manual INTM264300: permanent establishment definition in UK domestic and treaty law
Voymo gives general information to help you organise your move. It is not legal, tax, or immigration advice, always confirm with an official source or a qualified professional before you act.