Permanent Establishment
Definition
A fixed place of business, or a dependent agent, through which a foreign enterprise carries on business in a country, generally creating a taxable presence there under tax treaties.
Related Terms in International Tax
VAT
Value Added Tax, a consumption tax charged at each stage of supply where businesses collect tax on sales and reclaim tax on purchases, so the net burden falls on the final consumer. Used across the UK, the EU, the Gulf and much of the world; India and Canada run GST variants of the same mechanism.
Input VAT
VAT a business pays on its purchases and expenses, generally recoverable against the VAT it charges on sales provided the purchase relates to taxable supplies and a valid tax invoice is held. Non-business and exempt-related purchases are typically blocked.
Output VAT
VAT a business charges its customers on taxable sales and must account for to the tax authority. The amount payable each period is output VAT less recoverable input VAT; where input exceeds output, a refund position arises.
Reverse Charge VAT
A mechanism shifting responsibility for accounting for VAT from the supplier to the customer, used for cross-border services and in sectors prone to fraud such as UK construction. The customer records both the output and the input side, so there is often no net cash effect.
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