Permanent Establishment – Risk Mitigation and Set-up

One of the key concerns for most Global Mobility professionals is the risk for triggering a Permanent Establishment (PE) in the host country based on the activity of the mobile and remote workforce.

A PE is when there is no presence of a physical office/entity in the host country and a taxable presence is triggered in respect of Corporation Tax and other local taxes.

Financially, this could also present the business with a heavy and unexpected tax bill/liability.

In order to mitigate these risks, businesses need to review and consider many factors such as the following that will require expert guidance from related technical professionals:

1. Employment Contracts
2. Labor Laws
3. Visa & Immigration requirements
4. Payroll taxes (including Social Security contributions)
5. Tax rates and residency

As a way forward, businesses could set-up their own local entity as this would give the company complete control over the entire process.  However, the company would then need to engage and heavily rely on legal/accounting specialists locally.  This could be more time-consuming and complicated.

The other option is to engage the services of a GEO (Global Employment Organisation) that uses a local Employer of Record (EoR).  The latter is a third-party organization set up locally that can quickly hire and manage the entire payroll process legally and be compliant with local regulations without having to set up a local entity or risk violating local employment laws.

To read more on PE and it’s impact on GM, please review the article (courtesy of AIRINC) by clicking on the link below

Permanent Establishment