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What is a permanent establishment?

A permanent establishment is a legal term in tax and corporate law that refers to a specific physical location where a company conducts business activities. This term may vary slightly from country to country, but in general it refers to the following aspects:

  1. Physical location: A permanent establishment can be an office, factory, warehouse, branch or other physical location where a company conducts business.

  2. Business activity: Significant business activities such as production, sales, marketing or administration are typically carried out at this permanent establishment.

What do you need to know about business premises?

Permanent establishments must be considered under various legal and tax aspects, as they are subject to their influences:

  1. Taxes: The existence of a permanent establishment can have a significant impact on a company's tax liability. In many countries, companies that have a permanent establishment must pay taxes there and comply with local tax laws.

  2. Tax avoidance and evasion: A clear definition of a permanent establishment is important to prevent tax avoidance and evasion. If a company conducts business abroad but does not register a permanent establishment, this can lead to tax problems.

  3. Legal responsibility: The existence of a permanent establishment can also affect a company's legal responsibilities with regard to labour law, environmental regulations and other legal requirements.

  4. Trade agreements: International trade agreements often contain provisions on the treatment of permanent establishments and their taxation. The definition of a permanent establishment can therefore influence trade relations between countries.

  5. Accounting and compliance: Companies generally have to keep financial accounts for their business premises and ensure that they comply with local regulations and laws. This is important to avoid legal problems.

Overall, a clear definition and identification of permanent establishments is important to ensure that companies can fulfil their tax and legal obligations while conducting their international business activities efficiently and lawfully. It is advisable to consult with tax and legal professionals if you have questions about a permanent establishment.

If you are active in different countries, you need more than just a service provider for setting up and managing your foreign branch. InterGest offers you a flexible and customised solution for the optimal growth of your company in new target markets - so that you can concentrate on your core competencies.

Does InterGest provide a permanent establishment that fulfils the requirements of tax law?

It is not possible to provide a permanent establishment as such, but InterGest provides the infrastructure for setting up a permanent establishment, i.e. we take care of all the formalities for our clients if they wish to set up a branch or subsidiary abroad or set up additional branches.

In order to give the foreign business establishment to be founded a good start, we provide, among other things:

  • Staff who are able to carry out all office work in the local language as well as English, and sometimes also German

  • An officially approved accounting organisation under the direction of an auditor and a tax consultant

  • An experienced team of consultants for all specialised areas of international trade, transport and banking

  • Premises at strategically important locations in the respective countries

  • Extensive invoicing and accounting work, sales and stock statistics, margin calculations, agent and payroll accounting

Does setting up a company abroad mean that I have to rent an office and hire employees?

Setting up a company abroad does not necessarily require you to rent an office and hire employees. The specific requirements will depend on several factors, including your business objectives, the nature of your business and the laws and regulations of the target country. Here are some important considerations:

Type of business: If your business relies heavily on a physical presence, e.g. if you run a retail business, it may be necessary to open an office or shop. For online-only businesses, this may not be necessary.

Company structure: The choice of corporate structure can influence the requirements for a company abroad. For example, some countries require certain types of companies (e.g. subsidiaries) to have a local physical presence.

Local laws and regulations: Different countries have different laws and regulations governing the leasing of office space and the employment of staff. It is important to understand the local regulations.

Scope of business: If you are planning only limited activities abroad, it may be sufficient to appoint a representative or agent to represent your interests locally instead of opening your own office.

Tax considerations: Tax regulations can vary considerably depending on the business model and presence abroad. Some countries have double taxation agreements that regulate taxation.

Employees: Hiring employees abroad can entail additional obligations with regard to employment contracts, payroll, social benefits and labour law.

Since 1972, InterGest has been supporting companies on their way abroad as a service provider and guide, helping them to master the shoals between mentality, legislation, market structure and administration with confidence. With competent InterGest partners in over 50 countries from Canada to New Zealand, we help our clients to successfully open up foreign markets.

Who can set up a company abroad?

Setting up a company abroad can be carried out by various people and organisations. However, the exact requirements and possibilities vary depending on the country and legal system. Here are some of the common players who can usually set up a company abroad:

Individuals can set up a company abroad in many countries. This can be done for various business purposes such as trade, services or investments.

Companies, regardless of their legal form (e.g. corporations or partnerships), can establish subsidiaries or branches abroad. This enables them to become active in new markets.

Investors and entrepreneurs, who wish to expand into a particular country can set up a new company to start their business activities in that country.

Joint Ventures can be one way of tapping into a foreign market. Through a joint venture with local partners, you can benefit from their knowledge and resources.

Start-ups, who have international ambitions can set up abroad in order to benefit from specific market opportunities or resources.

Private equity firms and investment funds can set up subsidiaries to invest in foreign companies or assets.

Non-governmental organisations(NGOs) can set up branches or subsidiaries abroad in order to expand their humanitarian or social activities.

Governments and state organisations can open embassies, consulates or trade promotion centres abroad in order to establish and maintain diplomatic relations and promote trade relations.

You should bear in mind that setting up a company abroad can be associated with legal, tax and regulatory requirements that vary from country to country. It is therefore advisable to obtain detailed information about the local laws and regulations before setting up a company abroad and to seek advice if necessary.

As a global service provider, InterGest offers the full range of international management consultancy services. With our help, you will be able to adapt your business to the requirements of constantly changing markets.

What should I bear in mind when setting up a company abroad?

The following factors should be taken into account when setting up a company::

  1. Compliance with laws and regulations: Find out about and familiarise yourself with the laws and regulations of the country in which you want to set up your company. Make sure that your company complies with all local laws and regulations, including all necessary permits, licences and taxes.

  2. Corporate structure: Decide on a suitable corporate structure, e.g. a subsidiary, a branch office or a representative office. Each structure has its own legal and financial requirements and implications.

  3. Taxation: Find out about the tax laws and regulations in the country where you want to set up your business. This will help you to plan and budget for tax liabilities that your company may incur.

  4. Cultural considerations: Be aware of cultural differences when doing business in a foreign country. By understanding and respecting local customs and business practices, you can build trust and establish good relationships with partners, suppliers and customers.

  5. Language barriers: Make sure that you are aware of possible language barriers. It can be helpful to hire native speakers or locals, or bring in a translator or language expert if necessary.

  6. Legal representation: Consider hiring a local lawyer or legal advisor who is familiar with the laws and regulations of the country where you want to set up your business. They can help you clarify any legal and regulatory issues that may arise.

InterGest always puts together up-to-date, cost-effective and flexible service packages especially for small and medium-sized companies for the efficient development of foreign markets. The extensive range of services and decades of expertise in the respective target countries form the ideal basis for exporting companies to establish and manage foreign branches, subsidiaries or direct sales.

With offices in over 50 locations around the world, InterGest offers you advice and services for opening up foreign markets. This begins with the establishment and domiciliation of a foreign branch and extends to the fiduciary administration of accounting, tax and legal advice through to payroll accounting, controlling and reporting. Thanks to our internationally co-ordinated network of partners worldwide, we have comprehensive knowledge of the commercial and legal conditions in the respective country. The complexity of international trade is our daily business.