The PE concept is used to determine if a company has constituted sufficient presence in a foreign jurisdiction, which would trigger direct taxation of business profits of the company in that country. Generally, a country is allowed to tax the business profits of a foreign company only if that company has a PE in that country. A permanent establishment (PE) is when a business has an ongoing and stable presence in a country or state outside of their homebase and is therefore liable to taxes imposed by that jurisdiction. There are three types of permanent establishment under Indian law: Fixed Place PE, Agency PE, and Service PE. It is a presence in another country with business activities sufficient for that other country to impose tax. These business activities and presence necessary to create a PE are defined in tax treaties between the country where the entity has a residence and the country where it does business
The PE concept will be used to determine the UAE-sourced income. The PE rules and principles will be used to determine if a free zone has a PE in the UAE mainland. Corporate tax consultants in the UAE can offer further insights into the importance of the PE concept.
