Does hiring a salesperson abroad create a permanent establishment?
It can, because a presence does not require premises. The treaty tests a fixed place of business and a dependent agent separately, so even with no office, a person who habitually plays the principal role leading to the conclusion of contracts for you may create one. What matters is what the person actually does: whether they negotiate terms, whether the company routinely accepts what they agree, and whether they work exclusively or almost exclusively for you. A job title decides nothing. Before the first hire in a new country, look at the intended role honestly and price the consequence into the decision.
Is an employee working from home in another country a taxable presence?
It may be. A home can become a fixed place of business where the company effectively has it at its disposal and the work done there is part of the business rather than incidental. The analysis turns on the facts: how long the arrangement lasts, whether the company requires or expects the person to work there, whether it pays for the space, and what the employee actually does. A short secondment with the work performed for the local market looks very different from a settled arrangement building a customer base. Establish the facts before the arrangement becomes long-standing, because duration is part of the test.
Do we have to file a return abroad if we made no profit there?
Usually yes. Once the threshold is crossed the profits attributable to that presence are taxable locally, and a return is required whether or not tax turns out to be owed. Groups routinely miss this because they reason from the tax rather than from the obligation: there was no profit, so they assume there was nothing to file. That reasoning also forfeits the chance to state your own attribution of profit, leaving the authority to make its own. Where the answer on the threshold is genuinely uncertain, filing and disclosing the position is usually better than staying silent and being found later.
What makes an agent dependent rather than independent?
Independence is about substance, not the word used in the contract. An agent acting in the ordinary course of its own business, for several principals, bearing its own entrepreneurial risk and not subject to detailed instruction, is generally independent and does not create a presence for the principal. An agent who works exclusively or almost exclusively for one company, follows its instructions and carries none of the risk of its own activity is dependent, whatever the agreement calls it. The distinction is worth testing before appointment, because the commercial arrangement can often be structured either way while the trading objective stays the same.
Does having a warehouse in another country create a permanent establishment?
Not automatically. Treaties carve out activity that is genuinely preparatory or auxiliary, and storing or delivering goods can fall inside that carve-out. The exception narrows as the activity grows into part of the main business: a facility from which orders are processed, stock is managed as a commercial function and customers are served looks less like storage and more like operations. Some treaties also combine related activities across locations, so several small carve-out activities can amount to a presence together. Describe what actually happens at the site, then test it against the wording of the specific treaty rather than a general impression.
Our agent signs contracts for us, so is that a problem?
It is the clearest form of the risk, and formal signature is not even necessary for it to arise. Where a person habitually concludes contracts in your name, or habitually plays the principal role leading to their conclusion with the company routinely accepting the terms without change, the dependent-agent test is in play. Groups sometimes respond by moving signature back to head office while the local person continues to negotiate everything. That does not answer the question, because the test looks at who does the work of making the deal. Review what happens in practice and, where necessary, change the practice rather than the paperwork.
What is OECD Pillar One?
The part of the international agreement that reallocates a share of taxing rights over the very largest and most profitable groups to the jurisdictions where their customers and users are, regardless of physical presence — plus a simplified approach to routine marketing and distribution returns. It is aimed at the digitalised economy problem that physical-presence rules could not reach, and its implementation is still moving, which is why we read the current instrument rather than the original blueprint. See BEPS and Pillar Two.
Should I use a branch or a subsidiary abroad?
A branch is the same legal entity operating in another country, so its profits and losses sit with the parent and it is taxed there as a permanent establishment. A subsidiary is a separate company, taxed in its own right, with dividends and withholding on the way home. Losses, repatriation cost and liability usually decide it, and the answer differs by country pair. See branch vs subsidiary.
