Pillar Guide
Permanent Establishment Risk: When Your Presence Creates Tax Obligations
For consultants and founders working across borders, the concept of permanent establishment determines whether a country can tax your business income. The rules are not intuitive, and the consequences of getting them wrong are structural.
What is Permanent Establishment?
Permanent establishment (PE) is a tax treaty concept that determines when a country has the right to tax business profits of a foreign entity. Under OECD Article 5, PE can arise through a fixed place of business, a dependent agent, or exceeding day-count thresholds in certain jurisdictions.
The 183-Day Misconception
The 183-day rule is not universal. Different countries calculate it differently: calendar year versus rolling 12 months, partial days counted or not, and tie-breaker rules that can override raw day counts. Portugal, for example, can consider you tax resident under 183 days if you maintain “habitual residence” there.
Why This Matters for Solo Founders
A consultant spending 45 days in the UK, 60 days in Germany, and 30 days in Singapore may not trigger PE in any single country — but the aggregate pattern creates multi-jurisdiction exposure that compounds over time. Each jurisdiction has different rules, different thresholds, and different documentation requirements.
The Structural Gap
Most CPAs who serve small business clients have no framework for analyzing PE risk. This is not a failure of competence — it is a gap in specialization. PE analysis requires treaty-by-treaty evaluation that sits outside the scope of standard domestic tax preparation.
Related Analysis
Explore these structural insights for deeper context:
Permanent Establishment Risk: The Line Your CPA Might Not See
How cross-border consultants create PE exposure without realizing it.
The Structure Your CPA Can't Map
When your business spans jurisdictions your accountant has never navigated.
Tax Residency Is Not Where You Think
Physical presence alone does not determine your tax obligations.
Tax Residency Tie-Breaker Rules
When two countries both claim you, treaty provisions determine the outcome.
The Invoice Trail: How Cross-Border Income Gets Classified
How invoice patterns determine how your income is categorized across jurisdictions.
Map your PE exposure
The META Risk Profile identifies PE risk signals across the Tax dimension.
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