A Dependent Agent PE is one of those deceptively simple concepts that is particularly relevant for short-term assignees and business travelers, as their activities may inadvertently create a taxable presence for corporate tax purposes in the host country.
A PE is created if all of the following conditions are met:
1. There is an agent acting on behalf of your company.
This can also be a business traveler, sales representative, short term assignee.
2. The agent is dependent, meaning:
They are not legally and economically independent
They work mostly or exclusively for your company
They do not bear entrepreneurial risk.
3. The agent habitually concludes contracts or plays the principal role, leading to contract conclusion.
Contracts typically covered sales of goods or services, or the use of property. Even if the agent doesn’t sign the contract, if they effectively cause it to be signed, that’s enough.
Why it matters?
A Dependent Agent PE means the company:
becomes taxable on profits attributed to the PE in the host country
must file corporate tax returns in the host country
may face penalties for late registration there
may face personal income tax liabilities on the agent's remuneration in the host country.
This is often a surprise tax exposure for multinationals.