Nowadays, with the trend of globalization, companies increasingly have extensive business operations across many territories and jurisdictions but not all of them have a good understanding about domestic tax regulations, in host countries, as well as tax treaties. Meanwhile, the tax authorities in many countries are paying increased attention to and have aggressive policies on issues related to Permanent Establishment (“PE”), especially since the release of Base Erosion and Profit Shifting (“BEPS”) Action Plan by Organisation for Economic Cooperation and Development (“OECD”) in 2015. Therefore, one of the potential common tax exposures that international and global enterprises encounter in their normal course tradeoff business is the situation in which an unintended “taxable presence”, i.e. PE, is created in a jurisdiction.
In practice, it is not easy to recognize a PE in some circumstances. It might be created through business activities of corporations in the host countries and it is not easy to recognize in some circumstances. Consequently, failure in managing PE risks when doing cross-border business activities might result in unexpected negative impact on the tax position and worldwide business results of international and multinational corporations (e.g. tax claw-back, penalty and interest).
Please contact our experts to receive the full article which features following points:
- What is Permanent Establishment?
- PE creation in Vietnam - some specific cases
- Tax implications on PE and Tax Treaty protection