Permanent Establishment-Risk-Check

You are engaged in cross-border business and do not want to trigger an Austrian or foreign permanent establishment (PE)? Are you aware of the trend towards assuming a PE even in cases where no typical fixed place of business exists?

As the triggering of a PE leads to tax revenues for the PE state, many states – including Austria – tend to assume the existence of a PE even in cases where no typical fixed place of business exists, for instance:

• The employee’s home office 
• Office space at the site of the service recipient
• Foreign construction sites or installation projects 
• Rendering of services to other group companies by employees who physically work on-site 
• Borderline cases in the area of secondment agreements 
• Working at the service recipient’s site for a longer period of time 
• Agency PE even if no power of attorney under civil law exists
• PE of the principal due to a commission agent in the other state
• “Service-PE-Concept” included in some recently-concluded tax treaties 

As the triggering of a PE leads to tax revenues for the PE state, many states – including Austria – tend to assume the existence of a PE even in cases where no typical fixed place of business exists, for instance:

• The employee’s home office
• Office space at the site of the service recipient
• Foreign building sites, constructions or installation projects
• Rendering of services to other group companies by employees which physically work on-site
• Borderline cases in the area of secondment agreements
• The mere working at the service recipient’s site for a longer period of time 
• Agency PE even if no power of attorney under civil law exists
• PE of the principal due to a commission agent in the other state
• „Service-PE-Concept“ included in some tax treaties concluded recently

• Tax burden on PE-profits within the PE-state
• Double taxation of PE-profits
• Withholding obligations for employment taxes, social security obligations and other non-wage labour costs
• Differing VAT obligations 
• Withholding tax on payments made by your customers
• Taxation of employees in the PE-state – regardless of the 183-day rule!
• Liability for taxes and charges relating to prior years
• Penalties under Austrian tax law

• Step 1: Analyse the facts of the case using our standardised questionnaire either in a face-to-face meeting or a conference call
• Step 2: Review the relevant documents and agreements according to our standardised request list
• Step 3: Formulation of a written opinion on your tax situation: Evaluation of the exposure of triggering a PE; PE avoidance strategies, where required; taxation of employment income where a PE is triggered; high level discussion of the arm’s length compensation of the Austrian PE (transfer pricing issues)
• Step 4: Follow-up-call on our tax opinion, where required
• Fixed fees are possible

• A service for Austrian companies exposure to triggering a foreign PE
• Similar standardised check also for a foreign PE
• Coordination with our international Deloitte partner offices with Deloitte Vienna as a single point of contact
• Fixed fees are possible

• Support with avoiding triggering a PE (for instance drafting guidelines addressed to employees and service recipients, reviewing amendments to service agreements from a tax perspective)
• Tax registration of the PE together with tax compliance
• Supporting employees working in Austria with regard to their Austrian tax obligations by our Global Employer Services experts
• Support with social security and work permit issues
• Payroll accounting
• Computation of a range of an arm’s length compensation for the Austrian PE by our transfer pricing experts
• Coordination with our international Deloitte partner offices with Deloitte Vienna as your single point of contact

• Avoiding tax risks (and possibly criminal liability under Austrian taxation law)
• Effective PE avoidance strategies
• Tax benefit by avoiding the triggering of a PE in a high tax jurisdiction
• Tailor-made solutions in the area of corporate tax, VAT, payroll tax, withholding tax and transfer pricing – while dealing with only a single point of contact
• Time-effective service from the client’s perspective due to our efficient, standardised process