How Long Before Permanent Establishment Is Triggered?

[solotisorin]

In a European country known for being particularly aggressive on tax enforcement, how long does a person need to be physically present before the tax authorities might assert that a permanent establishment (PE) has been created for a foreign company?

Specifically, consider the case of an individual who is a citizen of that European country, but is currently a tax resident in a non-European jurisdiction, where their company is also legally registered and operating.

If this individual returns to their home country for several months (e.g. 4–5 months), performs only remote administrative tasks (like invoicing), and does not engage in local business development, meetings, or contract negotiations,could this still be enough for local authorities to argue the existence of a PE?

Does the combination of citizenship, temporary physical presence, and remote work increase the PE risk, even in the absence of any physical infrastructure or employees in the European country?

 

[Marzio]

Which country are we talking about?

Different countries have different PE rules, for example in Greece a legal entity is
considered as tax resident in Greece provided that the place of effective management is located in Greece for any period during the tax year.

https://www.oecd.org/content/dam/oecd/en/topics/policy-issue-focus/aeoi/greece-tax-residency.pdf

Just look up your EU country and read what its PE rules are.

 

[Cloudbanck]

Beside the legal aspect, I think it's possible to stay under the radar for many years even in the most aggressive EU countries. Like Peter Taradash has done.

 

[daniels27]

And you are not registered as resident? Also note that you can become personally tax resident after as few as 30 days.

I think you better decide whether you want to take the risk and fly under the radar or not. I would recommend you not to register, not to rent on paper and then maybe not show up in public too much and not for bragging about your off-shore business. And maybe pay a bit more cash and use a SIM card not registered on you.

 

[solotisorin]

And you are not registered as resident? Also note that you can become personally tax resident after as few as 30 days.

I think you better decide whether you want to take the risk and fly under the radar or not. I would recommend you not to register, not to rent on paper and then maybe not show up in public too much and not for bragging about your off-shore business. And maybe pay a bit more cash and use a SIM card not registered on you.

The individual will be a tax resident in the country where their company is legally registered and where they will spend more than 183 days this year, meeting the conditions for tax residency in that jurisdiction.

During their stay in their home country, they plan to spend only around 4 to 5 months, mainly for vacation and visiting family. Importantly, their total stay will remain well under 183 days, avoiding the threshold that could trigger tax residency status.

They will stay at a family member’s home,not renting any property, not registering any address, and not signing any local contracts. While there, they’ll only engage in limited remote administrative work, such as invoicing or basic internal tasks, without participating in local business activities, meetings, or negotiations.

 

[Marzio]

they plan to spend only around 4 to 5 months

LOL only?

You can spend even 0 day and trigger center of vital interests.

It's unlikely but you'll never know.

A random police control by driving family member's car can always happen and it could trigger a chain of unwanted events.

 

[JustAnotherNomad]

Speak to a tax lawyer from your home country - it really depends on the specific country and any applicable tax treaty.
I would think that the risk generally isn't very high under the circumstances you described (but there can be exceptions), and probably near zero in practice. Especially if it's a single year we're talking about (and not 4-5 months every year for several years).

 

[daniels27]

You can spend even 0 day and trigger center of vital interests.

During their stay in their home country, they plan to spend only around 4 to 5 months, mainly for vacation and visiting family. Importantly, their total stay will remain well under 183 days, avoiding the threshold that could trigger tax residency status.

With all due respect. If you do not even know which countries involved we are talking about, it is essentially pointless to continue this discussion. If there is no double taxation agreement, you can become tax resident on a personal level with as little as 30 days while working and 90 days while not working. And for the company, matters are not that much better.

In any case, there have been many people flying under the radar for years in very aggressive countries. Even with police checks, unrelated criminal case against them and they still fly. While others bragged a bit too much once and then got busted.

Just fly under the radar and try not to leave traces.

 

[maxmoney]

I think in today’s world, it’s important to be very cautious. One thing is what’s theoretically possible, another is what the law allows, and yet another is what might be doable under the radar.

But I’m convinced that authorities across Europe have significantly ramped up surveillance, with thousands of cameras everywhere and increasing digital tracking of people’s movements. It’s virtually impossible to stay completely hidden for any extended period of time.

 

[Marzio]

Especially if it's a single year

We both know that that's not the case.

If you do not even know which countries involved we are talking about, it is essentially pointless to continue this discussion.

I agree, that's why i suggested him to look up what are the PE rules for his home country.