Remote work is no longer a temporary arrangement—it is a permanent feature of the modern workforce. But when an employee logs in from another country, they may be doing more than answering emails. In some cases, they may be creating a Permanent Establishment (PE) for your company and exposing the business to unexpected cross-border taxation.
Use this checklist to identify whether your remote workforce may have inadvertently created a taxable presence in another jurisdiction.
Before you start
This checklist is designed for:
- CFOs and Tax Directors
- HR leaders managing global mobility
- Legal teams responsible for cross-border structure and compliance
One download per company is all you need. Share this with your tax, HR, and international expansion teams.
SIGN #1: THE 183-DAY THRESHOLD (IT’S NOT JUST ABOUT DAYS)
The common mistake:
Most companies track the 183-day rule for individual income tax. They assume that if an employee stays less than six months, the company is safe.
The PE risk:
Permanent establishment rules are different. In many treaties, a fixed place PE can exist from day one if the employee is performing core business activities from a location at the company’s disposal.
Ask yourself:
- Does the employee have a dedicated home office space used exclusively for work?
- Does the company require the employee to work from that location?
- Is the employee performing revenue-generating work (sales, consulting, project delivery) rather than merely administrative tasks?
- Does the employee regularly participate in internal strategy, pricing, or project decisions while located in that country?
- Has the employee been in the location for more than 30 days consecutively?
If you answered YES to two or more, your company may face heightened PE risk and should review the situation carefully.
SIGN #2: CONTRACT NEGOTIATIONS HAPPENING LOCALLY
The common mistake:
“We don’t sign contracts in-country, so we’re safe.” This is one of the most common misconceptions in international tax.
The PE risk:
Under BEPS Action 7, a dependent agent PE exists if a person plays the principal role in negotiating contracts, even if final approval and signature happen at headquarters.
Ask yourself:
- Does the employee meet with local clients to discuss terms and pricing?
- Does the employee prepare proposals or quotes for local customers?
- Do local clients communicate primarily with this employee rather than with headquarters?
- Does the employee have authority to offer discounts or modify standard terms?
If you answered YES to any of these, your company may face heightened PE risk and should review the situation carefully.
SIGN #3: ACCESS TO LOCAL PREMISES OR CO-WORKING SPACES
The common mistake:
“We don’t have a lease, so we don’t have a physical presence.”
The PE risk:
A fixed place PE may arise if a location is considered “at the disposal” of the enterprise, even if the company does not own or lease the space. This includes co-working spaces, client offices, or a dedicated desk in an affiliate’s premises.
Ask yourself:
- Does the company pay for a co-working membership or hot desk in the location?
- Does the employee work regularly from a local client’s office?
- Does the employee have keys, access codes, or permanent booking rights to a local space?
- Is there a dedicated space within a distributor’s or subsidiary’s office used by your employee?
If you answered YES to any of these, your company may face heightened PE risk and should review the situation carefully.
SIGN #4: LOCAL MARKETING AND BUSINESS DEVELOPMENT ACTIVITIES
The common mistake:
“We’re just building brand awareness. No sales are happening here.”
The PE risk:
Under anti-fragmentation rules, marketing activities that are part of a cohesive business operation can combine with other functions to create a PE. Marketing support, product demonstrations, and customer onboarding—when viewed together—may constitute a local sales operation.
Ask yourself:
- Does the employee attend local networking events or industry conferences?
- Does the employee conduct product demonstrations for potential clients?
- Does the employee provide local-language marketing materials or localized content?
- Is there a pattern of marketing activities followed by sales to the same region?
If you answered YES to two or more, your company may face heightened PE risk and should review the situation carefully.
SIGN #5: PROJECT-BASED WORK AT CLIENT SITES
The common mistake:
“We’re working on a client project. That’s their site, not ours.”
The PE risk:
Long-term project teams operating from a customer’s site can create a fixed place PE if the site is considered to be at the enterprise’s disposal. This is particularly relevant for consulting, engineering, and implementation services.
Ask yourself:
- Has the project team been on-site for more than three months?
- Does the team have dedicated office space or meeting rooms at the client site?
- Does the team use client facilities as their primary base of operations?
- Are there multiple related projects that, when aggregated, exceed treaty time thresholds?
If you answered YES to any of these, your company may face heightened PE risk and should review the situation carefully.
What to do if you identified any of these signs
If this checklist revealed potential PE exposure, do not panic. But do act.
Immediate actions to consider:
- Gather facts: Identify where employees are located, what activities they perform, and how long they have been there.
- Review treaty provisions: Assess PE thresholds and time limits in the relevant jurisdictions.
- Evaluate profit attribution: If a PE exists, determine how much profit may be attributable to it.
- Consider disclosure: Voluntary disclosure may reduce penalties in some jurisdictions.
Long-term solutions:
- Implement formal remote work policies that restrict where employees can perform core functions
- Train sales and project teams on activities that trigger PE
- Consider Advance Pricing Agreements (APAs) for high-risk jurisdictions
- Conduct periodic PE risk reviews when entering new markets
About Intelpoint Consulting
Intelpoint Consulting advises multinational groups on permanent establishment risk, transfer pricing alignment, and cross-border tax dispute management across African and international markets. Our team helps businesses identify and manage PE exposure before tax authorities begin inquiries.
If your team operates across borders, especially with remote employees or project teams, periodic PE reviews are essential.
Contact Intelpoint Consulting today for a confidential Permanent Establishment risk review. We help multinational companies identify exposure, align transfer pricing policies, and manage cross-border tax risk before disputes arise.
Disclaimer
This checklist provides general guidance and does not constitute legal or tax advice. Permanent establishment determinations depend on specific treaty provisions and factual circumstances. You should consult with qualified tax professionals regarding your particular situation.