Permanent Establishment
Also called PE
A fixed place of business or dependent agent creating jurisdiction to tax under a bilateral tax treaty.
In full
Under most U.S. bilateral tax treaties, a foreign enterprise's business profits are taxable in the U.S. only to the extent attributable to a permanent establishment — a fixed place of business or a dependent agent with habitual contracting authority. The PE concept overrides the broader U.S.-trade-or-business determination, providing relief where a treaty applies. Where PE exists, treaty protection collapses.
Governed by: Tax treaty — taxable presence.
This definition is general information about how the term is used in U.S. cross-border tax. It is not advice, and how it applies depends on your own facts and on the treaty, if any, in force with your country.
Related terms
- Effectively Connected IncomeIncome from a U.S. trade or business taxed at graduated rates after deductions, rather than the flat 30% FDAP withholding.
- Dependent AgentA representative whose authority to bind the foreign principal creates U.S. taxing jurisdiction.
- Treaty ClaimA formal claim under a bilateral tax treaty for reduced withholding or full exemption from U.S. tax.