Permanent Establishment Definition

A Permanent Establishment (PE) refers to a fixed place of business through which a company's activities are carried out in a foreign country. This can include offices, factories, or branches, and sometimes even a dependent agent with authority to conclude contracts. The purpose of identifying a PE is to determine when a company has enough presence in a country to be taxed there on its profits. It helps ensure that businesses pay taxes where they have a significant and ongoing operational footprint, preventing tax avoidance through minimal activity or presence in foreign jurisdictions.