Permanent Establishment Flashcards
General rule for international business
Business should be conducted by regional Units
Definition of a PE
Legally dependent business form of the registered presence of a company in a country of activity. Subject to local law and taxation.
Types of a PE
1) Building site/construction/installation PE 2) Dependent agent PE 3) Service PE
Building site/construction or installation PE - duration and activities
Duration more than 12 months, construction activities, on-site supervision, installation
Dependent agent PE - trigger
If a person is acting on behalf of the company and negotiates contracts on behalf of the company
Service PE - duration and activities
More than 183 days (in a 12 months period), consulting activities, software installation, training
Classification of PE within Siemens
1) Project PE(single/multi project), 2) Branch, 3) Representative office
Project PE
Constituted if the parent entity performs activities associated with an order/project over a certain period of time as direct business
Branch
PE defined as branch it it performs key corporate functions such as marketing, order processing, R&D, production or sales on a regular basis. Timeline: Usually longer than 5 years
Representative office
Differs from a project PE or branch, maintained in a country exclusively for auxiliary or marketing purposes, no activities associated with an order
Consequences of PE
Overall: Tax and cost implications of the legal requirements - infrastructure costs + administrative costs + risk of double taxation
1) Commercial/Tax/law - registration, accounting, tax declaration obligation 2) Labor Law (compliance with local law, taxation of salaries, Social Security) 3) other possible legal consequences (Opening bank account, risk of claims filed against parent company, sanctions for non-compliance with obligations)
Project PE approval process
Workflow based through PATAC, approval by CF T PE Governance & CFO
Branch PE / Representative office approval process
Form based process, approval by CF T PE Governance & CFO
Project PE PATAC - Steps (6)
1) Business Input (on/offshore split)
2) Timeline
3) Tax Feedback
4) PE Input (tax consultant)
5) PE Tax checklist
6) PE approval request
On/Offshore Split via FRAA, Checked Topics
Function, Risk and Asset Analysis
1) Function: In which country are the relevant people function performed (e.g. installation)
2) Risks: In which country are project decisions taken and risks borne?
3) Assets: To which country are project assets (bank account, cars) located?
4) Analysis: Country specific regulations