What is a UK permanent establishment?
What is a UK permanent establishment?

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • What is a UK permanent establishment?
  • Permanent establishment, branch or agency
  • UK domestic law and double tax treaties
  • Domestic law definition of a permanent establishment
  • Exclusion for preparatory or auxiliary activities
  • Exclusion for independent agents
  • Internet servers
  • Differences between domestic law and treaty definitions
  • The OECD definition of a permanent establishment
  • Service permanent establishments

This Practice Note looks at the meaning of a permanent establishment (PE) for tax purposes, both under UK domestic law and in double tax treaties.

The UK tax treatment of a non-UK resident company largely depends on whether it has a PE in the UK. It is therefore important to be able to identify the point at which a non-resident company's presence in the UK will amount to a PE.

A non-resident company trading in the UK through a PE will be chargeable to UK corporation tax. A non-resident company that has a UK PE that is not trading (for instance, an establishment that holds intellectual property as an investment) may be chargeable to income tax. There are special rules for companies that hold UK land or buildings. For more details on the significance of whether a non-resident company has a PE, see Practice Note: When does the UK tax non-resident companies?

A non-UK resident company that operates in the UK, and that has taken active steps to avoid creating a taxable PE in the UK, may have to pay the diverted profits tax. For more information, see Practice Note: The diverted profits tax—charge to tax.

For details on how a PE is taxed, including how to attribute profits to a PE and the impact of tax treaties, see Practice Note: How is a UK