PE is when a country decides you have enough local presence to tax you. Two things usually tip it: operating from a fixed place or having a dependent agent who habitually concludes contracts. Keep pricing and signature at HQ, avoid presenting a local “office” before you have one, employ early teams via EOR while you test demand, and graduate to a PEO or entity when headcount and revenue truly concentrate.
What is Permanent Establishment in plain English?
You can sell into a country without an entity. You create a problem when it looks like you’re based there. Authorities look for permanence (a place you regularly use to do business) and local authority (someone who can commit the company). If you control those two, you reduce risk while you learn the market.
Ten common triggers.
- Local emails that “finalise” price or terms
Draft locally if you must, but the binding quote and contract should be issued and signed at HQ through your standard workflow. - Calling a coworking site “our office“
Use ad-hoc rooms. Don’t publish the address or add signage until you’re ready to register. - Engineers or solutions staff sending order forms
They validate the tech. Commercial paperwork originates from HQ. - Binding quotes issued locally with expiry dates
Locals can propose; only HQ issues anything binding. Keep an audit trail. - Publishing a country office on your website before you have one
List coverage hours, not a postal address. - Storing stock and fulfilling locally
Warehousing points to a fixed place. Use third-party logistics carefully or accept you’re moving toward local registration. - Long-term apartment used as a meeting base
Regular business use of one location looks permanent. Prefer client sites or rotating venues. - Contractors who behave like employees and have authority
Remove authority in writing or employ via EOR if the role is ongoing. - Procurement negotiations concluded in-country
Progress locally; finalise and sign at HQ. Keep a clear signature matrix. - Assuming “remote” means “risk-free”
Home-working alone isn’t PE. Home-working plus authority and permanence can be. Document roles and reasons.
Governance first, then hiring
Give a named squad (COO, CFO/Payroll, HR, Legal) ownership. Store everything in one access-controlled workspace. Put NDAs in place with partners and open KYC early so onboarding doesn’t stall later.
Write short, local-law role scopes for anyone in-country and add a clear “no authority to bind the company” clause. Ask counsel to review once so you can reuse the pattern. Keep an evidence pack that stands up on its own: your signature matrix, pricing policy, deal-desk flow, meeting-location guidance, and a simple data-handling note (who accesses what, how it’s transferred, and how it’s deleted when you switch providers).
Hiring in a new country without creating PE too early
If you need people quickly, employ the first 0–20 via an Employer of Record. You’ll have correct contracts, payroll and taxes from day one while you test demand. Authority still matters: keep pricing and signature at HQ and make the limits explicit in contracts and scopes.
At about 90 days, look at three signals:
- Headcount density (are people concentrating here?)
- 12–24-month margin outlook (can the market fund fixed costs?)
- Commercial needs (local invoicing, credit, tenders)
If the answer is “yes,” graduate to a PEO or entity. Run it like a payroll cut-over: preserve compensation and benefits, align calendars, communicate once and clearly. That’s how you keep trust and avoid noise.
Useful reads: EOR Services • Global Expansion Without Entities
Immigration, works councils, timing
If anyone is on a visa, or you’re operating in a works-council jurisdiction, raise it early. Changing legal employer or structure without sequencing this properly creates both immigration and tax pain. Point your team to Immigration & Visas and loop counsel in before you move pieces.
Keep a clean audit trail
If a tax authority asks, you’ll need facts, not stories. Keep DocuSign logs showing HQ signatures; role scopes and “no-authority” acknowledgements; a short note on meeting locations; and data-transfer logs plus deletion confirmations when you switch providers.
When to accept PE and get on with it
Sometimes the right call is to register: you need local tenders, credit, or country-specific invoicing and the numbers justify it. Register, align payroll, update pricing for the tax reality, and brief finance on month-end. Better than operating in grey.
Quick reference: PE-safe operating patterns
| Activity | Safer pattern | Owner |
| Pricing & quotes | Suggested locally; binding quote issued by HQ | Deal desk |
| Contract signature | Always at HQ; clear signature matrix; “no authority” letters on file | Legal |
| Meeting locations | Client sites or ad-hoc rooms; no published “office” | Sales |
| Employment | EOR for first 0–20; graduate when density is real | HR & Finance |
| Evidence | Doc logs, scopes, deletion confirmations | Legal & IT |
FAQs
Does a remote employee automatically create PE?
No. It depends on what they do, where they do it, and who holds authority. Keep signatures and pricing at HQ until you’re ready to move.
Are contractors safer than employees?
Only if they truly lack authority and don’t operate from a fixed base for you. If the role is ongoing and employee-like, employ via EOR or plan your entity.
When should we switch from EOR to entity?
When headcount and revenue concentrate, customers expect local invoicing/credit, or the EOR cost curve crosses. Plan the move like a payroll cut-over.
If you want help
We’ll design the guardrails, set up compliant hires through EOR, and plan your graduation when the numbers justify it—calmly, on a timeline. Book a 30-min PE risk review.
Useful links: EOR Services • Immigration & Visas • Founders Law • Customer Experience
