Permanent Establishment Flashcards

1
Q

General rule for international business

A

Business should be conducted by regional Units

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2
Q

Definition of a PE

A

Legally dependent business form of the registered presence of a company in a country of activity. Subject to local law and taxation.

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3
Q

Types of a PE

A

1) Building site/construction/installation PE 2) Dependent agent PE 3) Service PE

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4
Q

Building site/construction or installation PE - duration and activities

A

Duration more than 12 months, construction activities, on-site supervision, installation

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5
Q

Dependent agent PE - trigger

A

If a person is acting on behalf of the company and negotiates contracts on behalf of the company

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6
Q

Service PE - duration and activities

A

More than 183 days (in a 12 months period), consulting activities, software installation, training

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7
Q

Classification of PE within Siemens

A

1) Project PE(single/multi project), 2) Branch, 3) Representative office

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8
Q

Project PE

A

Constituted if the parent entity performs activities associated with an order/project over a certain period of time as direct business

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9
Q

Branch

A

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

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10
Q

Representative office

A

Differs from a project PE or branch, maintained in a country exclusively for auxiliary or marketing purposes, no activities associated with an order

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11
Q

Consequences of PE

A

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)

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12
Q

Project PE approval process

A

Workflow based through PATAC, approval by CF T PE Governance & CFO

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13
Q

Branch PE / Representative office approval process

A

Form based process, approval by CF T PE Governance & CFO

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14
Q

Project PE PATAC - Steps (6)

A

1) Business Input (on/offshore split)
2) Timeline
3) Tax Feedback
4) PE Input (tax consultant)
5) PE Tax checklist
6) PE approval request

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15
Q

On/Offshore Split via FRAA, Checked Topics

A

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

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16
Q

Accounting Approaches for a PE - Requirements / When in place?

A

PE activities are fully compromised of the parent entity, subject to IFRS, local commercial GAAP, local tax regulations
2) At an early stage

17
Q

PE, three basic accounting approaches

A

1) Reporting solution - requires no local accounting for PE, local reporting purely on IFRS figures
2) PE accounting solution - PE maintains a separate accounting system. Accounting data for PE is extracted from the parent entity accounting, further adapted in the PE accounting system (PE IT Tool)
3) Dependent ARE solution - always in the case of a branch.

18
Q

PE approval - must be in place when?

A

Before binding offer is placed (PM040)

19
Q

Opening a PE, steps after PM070

A

1) Order Creation in PATAC
2) Order Creation business input
3) Update Timeline if needed
4) Update tax feedback

20
Q

Responsibility of a PE Manager

A

Representative of the Lead Unit, overall responsibility to organize and monitor setup, processing and closure in accordance with local law. Examples: Open local bank account, hire PE personnel, perform payments on behalf of PE, sign tax declaration

21
Q

Responsibility of CPMs/Business

A

Delivering information and data to assure compliance, fulfilling tasks for PE Reporting (e.g. PE IT Tool)

22
Q

Responsibility of CF T

A

Responsible for all tax related topics concerning the PE, ensures tax compliance

23
Q

Responsibility of PE Local accountant

A

Supports tax function to comply with local law and taxation.

24
Q

PE, local registrations

A

1) Corporate income tax registration 2) VAT sales tax registration 3) Personal income tax registration 4) Registration for other local taxes

25
Q

CISS (Corporate Information on Siemens Subsidiaries) Tool

A

Central database to record Siemens entities. PE needs to be entered (registration documents, PE Manager). PE receives a CISS number

26
Q

Setup of PE reporting

A

SAP setup must reflect on-and offshore split. CPM assigns SD Orders or WBS elements to split Financials

27
Q

Unintended PE - what to do

A

Immediately inform tax department via PATAC

28
Q

How does a PE Manager get assigned?

A

Assignment letter

29
Q

What is the PE Manager Checklist?

A

Checklist to serve as a guide for PE Manager to fulfill his/her duties

30
Q

PE, Corporate Income Tax

A

SAP reflects split of project, assures correct taxation of profit attributable to the PE

31
Q

PE, Withholding Tax

A

1) Credit-side WHT - must be deducted and paid by Siemens to the tax authority, represents tax payment on behalf of supplier
2) Debit side WHT - must be deducted and paid by the customer to the local tax authority. Represents tax payment on behalf of Siemens

32
Q

PE, relevant tax types

A

1) Corporate income Tax
2) Withholding Tax
3) VAT
4) Personal Income tax

33
Q

PE, Transfer Pricing Documentation

A

Arms length principle needs to be complied with, based on FRAA. Transfer Price Report needs to be updated on a yearly basis. Consequences: Penalties, ban, damage to Siemens reputation

34
Q

PE, PATAC, warranty

A

In case the project is in the warranty phase and warranty activities are required, a separate PATAC entry needs to be created

35
Q

When can a PE be closed?

A

When the purpose of the PE has ceased to exist & all legal and tax obligations have been fulfilled.

36
Q

Liquidation process and local deregistration of a PE

A

After closure approval has been obtained, recovery of assets, archiving documents, tax audit, closure of bank account

37
Q

PE Closing status in CISS

A

Closure approved = in liquidation
Dormant status approved = dormant
Closure rejected due to legal reasons = works completed

38
Q

Double Taxation Treaty

A

Contract between two countries in which the taxation rights are distributed among the countries