A fixed office, shop or warehouse used in your core business; a resident agent with authority to sign contracts; staff providing services for more than 183 days; a construction or installation project running beyond 6 or 12 months. Under the OECD Model and most tax treaties, any one of these can let the source country levy corporate income tax on the profits attributable to the PE. 4 yes/no questions give you a first risk rating.
Permanent establishment (PE) is a core concept in international tax. Once you have a PE in the source country, that country can levy corporate income tax on the profits attributable to the PE, rather than only charging withholding tax or nothing at all. The OECD Model and most bilateral treaties recognise several common types: a fixed place PE (an office, shop or warehouse used in the core business; facilities used solely for storage or display that meet a treaty exception are usually treated separately), a dependent agent PE (an employee or agent based there with authority to conclude contracts on your behalf), a service PE (services provided abroad, including through seconded staff, for more than 183 days in any 12-month period, though individual treaties vary), and a construction PE (a building or installation project lasting more than 6 or 12 months, depending on the treaty).
The four yes/no questions here map to these four common triggers and give a rough rating. The direct consequence of a PE is that the foreign country taxes the attributable profits. If your country of residence taxes the same profits, you face double taxation, which has to be relieved through treaty exemption or credit together with sound profit attribution and transfer pricing documentation. Many people assume that without a local company there is no local corporate income tax. PE rules exist precisely to close that gap: even without a subsidiary, you can be taxed locally because of premises, agents, service days or project duration.
The analysis cannot stop at whether you have an office. Whether a warehouse is purely auxiliary storage, whether an agent really has authority to sign, whether service days are counted on a rolling 12-month basis, and whether a project has been split into several contracts to stay under a threshold are all frequent points of dispute in audits and treaty interpretation. Artificially splitting contracts to avoid the 183-day or 6/12-month thresholds is high risk under audit.
The source country can generally levy corporate income tax on the business profits attributable to the PE and may require local registration, filings and bookkeeping. If your residence country taxes the same profits, relief has to come through the treaty's exemption or credit mechanism; otherwise you are taxed twice.
This tool uses the common treaty wording: more than 183 days in any 12-month period. A particular bilateral treaty may use a different number of days or a different counting method, so always check the full treaty between the target country and China (or your country of residence).
It depends on whether the warehouse is used only for auxiliary activities such as storage or display and whether a treaty exception applies. Premises used for core operations, order processing or substantive sales support carry much higher risk than pure storage. Sales tax and VAT obligations triggered by inventory follow a different logic from PE and should not be confused with it, although the warehouse facts feed into both assessments.
Treaties set different PE thresholds for building and installation projects, most commonly more than 6 months or more than 12 months. The tool lists both to remind you not to assume one figure and to check the specific treaty.
No, it is not an assessment. The check rates your answers on premises, agents, service days and project duration against the common PE types and suggests priorities. Whether you actually have a PE and how profits are attributed depends on the full business facts, contracts, treaty text and the tax authority's position.