A permanent establishment is a taxable presence your business creates in another country. Once it exists, that country can tax the profits made through it. Under the OECD model and most treaties, it usually comes from a fixed place of business, a dependent agent or a long construction project.
The three main routes
- A fixed place of business through which the business is wholly or partly carried on, such as an office, branch or factory.
- A building or construction site that lasts longer than the period in the treaty, often six or twelve months.
- An agent who has authority to conclude contracts for the business and habitually uses it.
What usually does not count
- Activities of a preparatory or auxiliary nature.
- An independent agent acting in the ordinary course of its own business.
- A subsidiary, merely because the parent controls it.
The exact wording differs from treaty to treaty, so check the one between your country and the other country. If there is no treaty, the other country's own law applies.
The UAE's own rule
The UAE Corporate Tax Law has its own test for non-residents. It covers a fixed place, including a place of management, branch, office, factory, workshop or real property. It also covers construction projects lasting more than six months and dependent agents who habitually conclude or negotiate contracts. Where a treaty in force says something different, the treaty prevails. For a foreign company run from Dubai, see Can I run my overseas company from Dubai without it becoming UAE taxable?
An example
Tomás is Chilean and runs an engineering company in Dubai. He sends a team to install equipment at a client's plant abroad for nine months. If the treaty with that country sets a twelve-month limit for projects, there is likely no permanent establishment. If it sets six months, there likely is, and the company must file there.
Quick questions
Does one sales trip create one?
Usually not on its own. Regularly signing contracts there, or using a local office, is a different matter.
What happens if my business has one?
The other country can tax the profits that belong to it, and the business normally has to register and file there.
Sources: HMRC International Manual INTM153060: double taxation agreements, permanent establishment (explaining the treaty model); UAE Ministry of Finance: Federal Decree-Law No. 47 of 2022 on Corporate Tax, as amended.
General information as at October 2026, not advice. The examples are fictional and simplified, and the rules have conditions and exceptions not covered here. Take advice on your own circumstances, in each country involved, before acting.