Our project abroad has run longer than we expected — are we taxable there?
Very likely, if the project itself has run past the period the treaty allows. Construction and installation provisions count the duration of the site or the project, not the presence of any individual, so a project that continues beyond the threshold creates a presence for the firm. In most treaties that presence is then treated as having existed from the start of the project rather than from the date the threshold was crossed, which is what catches firms out: the filing obligation reaches back over a period during which everyone believed there was nothing to file. The first step is to date the start and the end of the project precisely, including preparatory work carried out on site.
How is a construction project counted for permanent establishment purposes?
By the life of the project rather than by who is on site. The clock generally starts when work begins at the location, including preparatory work, and runs until the work is complete or permanently abandoned. Temporary interruptions for weather, materials or client delay usually do not stop it. Related activities at the same site tend to be counted together, and work performed by subcontractors on the firm's behalf generally counts towards the firm's own duration. Two genuinely unconnected projects in the same country are counted separately, so the test is applied site by site rather than to everything the firm happens to be doing in that country. Date the project carefully at the outset, because every other answer rests on it.
Our client withholds on reimbursables as well as fees — is that right?
It is common, and it is not always correct, but there are two separate questions here. Whether the payer was obliged to deduct is decided by that country's domestic law and by whatever treaty relief you established with the payer beforehand. Many withholding regimes apply to the gross payment by design, because the payer is in no position to work out your costs, and reimbursed expenses generally fall within that gross amount. Where deduction on the full sum is disproportionate to the tax actually due, the remedy is usually a certificate obtained in advance reducing the rate, or a return filed in that country claiming the excess back. Invoicing disbursements separately does not by itself change the treatment.
Do short site visits by different engineers add up to a presence?
They can. Where the exposure comes from a construction or installation site, the pattern of individual visits is beside the point, because what is counted is the duration of the project itself. Where it comes from a services provision instead, the count is normally of days of presence by the firm's personnel on a project or on connected projects, and different people's days are added together. Either way a series of short visits to the same project is assessed as one thing. The common mistake is to test each engineer's trip separately against a relief designed for individuals and conclude from that the firm has nothing to file.
We payroll from one office but staff projects from several — is that a problem?
It is a common problem in this sector. Employment tax generally follows where the work is performed rather than where the payroll is run, so staff working on a site abroad can trigger withholding and reporting in that country even though they are paid from home. Relief for short assignments exists, but it usually falls away where the firm has a taxable presence there — and a project long enough to create a presence removes the relief for everyone working on it. The second problem is internal: when several offices supply people to one project, someone must decide which entity bears the cost, because that allocation drives both the payroll answer and the attribution of profit.
Does splitting a project between group companies avoid a taxable presence?
Rarely, and the attempt is well known to revenue authorities. Provisions on construction and installation are usually read with fragmentation in mind: activities carried on at the same site by closely connected enterprises, or successive contracts covering one commercially coherent project, tend to be aggregated for the purposes of the duration test. Splitting also creates problems of its own, in the form of intercompany charges that have to be priced and supported, and a second entity with its own filing history in that country. There are sound reasons to use a group company on a project, including licensing and liability. Managing the duration test is not one of them.
Does the foreign earned income exclusion cover capital gains, dividends or a pension?
No. It covers earned income — pay for services performed abroad — and nothing else. Investment income, rental income, capital gains, pensions and social security all stay fully taxable, relieved if at all by the foreign tax credit or a treaty article. This is the single most common misreading of it: people exclude a salary, assume the rest followed, and discover the gap when the investment income is assessed. See exclusion against credit.
I work remotely from another country for a company back home — who taxes me?
Usually the country you are physically in, because employment income is generally sourced where the work is done, with your residence country taxing it as well if you are resident there and giving credit. Three things follow: your employer may acquire withholding and social security obligations where you sit, a treaty tie-breaker may be needed if both countries call you resident, and a short trip that becomes a long stay can cross a residence threshold nobody was watching. See remote workers and digital nomads.
