Permanent establishment

NotesQuizCBE

What is a permanent establishment?

The  rules  that  apply  to  the  taxing  of  overseas  income earned by UK Resident companies  are  set  out  in  the Organisation for Economic Co-operation and Development Model (OECD).

Trading overseas:

The normal provision in tax treaties is that an overseas country will usually tax income arising in its country from the commercial operation of a UK resident company if:

1) A trade is carried on within its boundaries
2) The profits are derived from a permanent establishment set up for that purpose

Permanent establishment

The term “permanent establishment” within an overseas country includes a place of management, a branch, an office, a factory, a workshop or any mine. 

A UK resident company that possesses a permanent establishment trading within an overseas country will normally be charged to tax on its overseas profits arising by UK HMRC and the overseas authority under their own tax code.

NotesQuizCBE