Insights on permanent establishment for seasonal and/or temporary activities

Performing activities abroad (or in case of being a non-resident company in Spain), may be considered as operating through a Permanent Establishment (“PE”) on tax purposes. However, determining if achievement of activity is really made in form of Permanent Establishment is not always easy. Performing a business in a territory other than that of non-residence, even when it is done presentially, is not a condition as such for being categorized as a Permanent Establishment. In addition to domestic legislation, Permanent Establishments mirror to international double taxation treaties.


However, these definitions may not be perfectly adapted to our particular case in the way set out in the conventions. In addition, grammatical aspects can play tricks on the adjective "permanent":


Can a temporary activity, carried out in a country where one is not a resident, be considered a Permanent Establishment?


Fact is that the convention may issue statements, such as the following.


"For the purposes of this Convention, the definition 'permanent establishment' means a fixed place of business through which a company carries on all - or part - of its activity".


In accordance with the Agreement stipulated by the Organization for Economic Co-operation and Development, several conditions can be distinguished here:

  • Business location; that is, facility, premises...

  • Fixed; a place established with a certain permanence.

  • Activities performed in that fixed business place.

Permanent establishment for seasonal and/or temporary activities


In those cases of temporary activity, it seems that the term "fixed" may be the one "breaking" the conditions necessary to be considered a Permanent Establishment. However, the comments clearly state: although countries usually adhere to the dictum that an activity will not be temporary if it exceeds six months in duration, it is possible that the very nature of the business requires that it can only be carried out in a short period of time.

Subsequently, there are exceptions to this rule. These should be determined with other criteria (recurrence in time of the activity, if the company carries out similar activities in its country of residence...)


Therefore, when doing business in other countries different to our tax residence, especially when this is performed physically, we recommend to review if the Tax Office of that country can categorize our entity as a Permanent Establishment and require compliance with their tax obligations. Even if the activities are temporary and/or seasonal.


Are you doing business in other countries? Contact us. Our International Department will be glad to assist you.




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