us nl

Permanent Establishment

797838-auto-in-stof.jpgA permanent establishment refers to a fixed place of business through which the business of a firm is wholly or partly carried on. A permanent establishment can cause double taxation, because an organization is operating in two distinct jurisdictions. Bilateral tax treaties provide the conditions under which a tax exemption or tax credit with respect to the company’s profits should be awarded. It is important to stress that the permanent establishment is not an independent legal person. Therefore, from a fiscal-judicial standpoint, a permanent establishment differs from a subsidiary with regard to its fiscal implications and options. In practice, all profits and losses of the permanent establishment form an integral part of the total profits of the organization. As a result, it needs to be determined which part of the total profits of the organization can be allocated to the permanent establishment. Profit allocation and the determination of the permanent establishment’s result can either be computed by utilizing the indirect method of profit splitting or the direct method of company splitting. The difference of these methods is found in their application: the indirect method presumes there is one organization with one profit, whereas the direct method presumes that there are two enterprises within one organization.

“Wisdom begins in wonder.”

Socrates (469 BC – 399 BC), Greek Philosopher

Van Clamsfield International Ltd. offers advisory services concerning the following:

  1. Computing the profit allocation numbers of the permanent establishment, using the indirect or direct method;
  2. Guidance on fiscal possibilities with regard to a permanent establishment and the settlement of losses;
  3. Insight into the fiscal implications and options of both permanent establishments and participations;
  4. Guidance on the fiscal consequences of the conversion of a permanent establishment into a participation;
  5. Guidance on the fiscal consequences of the alienation of a participation, which previously formed a permanent establishment;
  6. Information on the fiscal unity in concurrence with the permanent establishment;
  7. Assistance in the prevention of double taxation with regard to both permanent establishments and participations.

In European tax law context, the fiscal-judicial treatment of permanent establishments is winning terrain, as the Court of Justice of the European Union pronounced jurisprudence, which entails that permanent establishments should be awarded a similar legal position to participations. Van Clamsfield International Ltd. renders assistance to companies, which wish to optimally utilize the fiscal-economic possibilities of the permanent establishment.

All rights reserved. Copyright © 2019 Van Clamsfield International Ltd.
Code: Buxolutions | Layout & Styling: Shapeshift Media