Permanent Establishment (PE) Risk – Practical Application

Service PE and dependent/agency PE

• Overview of Article 5 of the OECD Model Treaty and UK PE rules.
• Difference between a service PE and a dependent agent PE; when does performing services or concluding contracts abroad create a PE?
• Expansion of the dependent agent concept to include agents who habitually play the principal role leading to contracts being concluded.
• Activities that generally do not create a PE (preparatory or auxiliary activities, representative offices, storage and display).

Common risk indicators and practical issues

• Sales teams and contract negotiation: employees or agents visiting customers abroad; habitual conclusion of contracts or finalising terms.
• Short‑term projects: construction/installation sites, project offices and the 12‑month threshold under treaties; variations in different treaties.
• Digital and remote work models: remote employees, home‑office arrangements and e‑commerce platforms; discussion of whether customer location or value creation should determine PE.
• Contract manufacturing, warehousing and logistics – when do these activities move from auxiliary to core operations?

Documentation and operating model mitigations

• Importance of intercompany service agreements outlining authority limits and risk allocation.
• Establishing authority matrices to ensure employees abroad cannot habitually conclude contracts without proper approvals.
• Evidence of preparatory/auxiliary nature of activities: board resolutions, sales policies, marketing materials and demonstration that key decisions remain in the home jurisdiction.
• Monitoring remote work policies post‑COVID‑19 and developing procedures to manage remote workers overseas.

Case studies and exercises

• Participants analyse a scenario in which a UK company’s sales team visits Germany and finalises contracts; determine whether a PE arises under the UK–Germany treaty.
• Group discussion on a digital services company operating cloud servers in multiple countries – does this create a fixed place of business?
• Exercise to draft a PE risk‑assessment checklist and an authority matrix for contract negotiation.

Redcliffe's course trainer is the CEO and Tax Advisor at a tax consultancy / advisory firm. He advises internationally active businesses and individuals on UK and cross-border tax, with a particular focus on permanent establishment risk, corporate residence/POEM, treaty positions and documentation, and cross-border structuring (including withholding tax considerations and transfer pricing).
The trainer lectures in International Taxation (CIOT/ADIT context) and has held senior tax leadership and advisory roles, including Head of Tax for the Diacron Group and consulting/advisory work with other International Tax firms (including Bain & Company). He has worked across multiple jurisdictions including the UK, Italy, the US and Costa Rica, and brings a practitioner-led, case-driven approach that is grounded in real client scenarios.

• Differentiate between types of PE, including fixed‑place of business PEs, service PEs, and dependent agent PEs, and understand how the OECD Model Treaty and UK domestic law apply.
• Identify common PE risk indicators such as sales teams, negotiations and contract conclusion abroad, warehousing or logistics operations, short‑term projects and construction site rules, and operations in the digital economy.
• Evaluate whether activities are preparatory or auxiliary, and therefore outside the scope of PE, and recognise how modern business models challenge traditional interpretations.
• Develop documentation and operating models that manage PE risk, including clear authority matrices, intercompany agreements and evidence that activities abroad remain preparatory/auxiliary.
• Apply the concepts through practical case studies and group exercises to reinforce understanding and ensure immediate applicability in the workplace.

• Tax directors, heads of tax and in‑house tax managers responsible for cross‑border operations.
• Finance controllers, CFOs and accounting professionals seeking to understand the tax implications of international expansion.
• Legal counsel and company secretaries involved in drafting contracts and advising boards on international activities.
• Entrepreneurs and founders expanding into new markets who want to avoid inadvertent PE creation.
• Advisers and consultants working in corporate tax, international tax or transfer pricing.

Permanent establishment risk is a critical issue for businesses operating across borders. Allowing employees or agents to negotiate contracts abroad, establishing project sites or warehousing, or simply failing to document limits on authority can lead to unexpected tax liabilities and compliance burdens. This course provides the knowledge and tools to recognise PE risk indicators and implement practical mitigations. By the end, participants will be able to assess PE exposure in their own organisations, design appropriate governance frameworks and documentation, and confidently manage discussions with advisers and tax authorities.