The new 'permanent establishment' | KPMG Global
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The new 'permanent establishment': how BEPS will impact business travellers

The new 'permanent establishment'

Ablean Saoud examines how the OECD's BEPS project, and specifically Action 7, will affect multinational business travellers.


Partner, Global Mobility

KPMG Australia


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Business traveller at airport

It is expected that outcomes from the Organisation for Economic Co-operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) project will affect many multinational business travellers. 

Specifically, the BEPS Action 7 Report suggests changing the definition of ‘permanent establishment’ (PE) for international tax law. 

Consequently, many countries, including Australia, are entering into a multilateral instrument to change the definition of PE (among others) in tax treaties. This may apply to Australia’s treaties from as early as 1 January 2019. 

Even countries that decide not to adopt the report’s recommendations will likely monitor multinationals more closely to identify whether their activities are causing PEs to arise.

How will this affect your people?

If your people are travelling regularly to specific locations, these changes will increase the risk that their travel will give rise to a PE in Australia and/or foreign jurisdictions. This will particularly affect:

  • Employees who are conducting business activities to conclude contracts while travelling in another country. This may cause a PE to arise for their employer in the country where the activities are performed.
  • Employees who regularly visit the business premises of a related overseas entity. These visits could result in the foreign office being considered a fixed place permanent establishment of the employer. 

As a result, these PEs could affect not only domestic corporate taxes, but also attract further wage and employment tax obligations in foreign jurisdictions. 

What can you do?

To minimise the impact of these changes, we recommend that human resources and mobility professionals pay close attention to the movements of its mobile employees to ensure they are not giving rise to PEs while travelling for business.

Likewise, we also recommend implementing or revising travel policies, procedures and rules for mobility staff to manage the risk of a PE arising in a foreign jurisdiction.

© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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