Permanent Establishment (PE) & Nexus Rules

What Is a Permanent Establishment (PE)?

A Permanent Establishment (PE) is a concept used in international tax law to determine when a foreign business has established enough presence in a country to be liable for local taxation.

Under Australia’s tax treaties and the OECD Model Tax Convention, a PE typically includes:

  • A fixed place of business (e.g., office, branch, factory)

  • A dependent agent who regularly concludes contracts on behalf of the foreign entity

  • Significant economic activity that goes beyond mere preparatory or auxiliary services

When a PE is deemed to exist, the foreign company may become subject to Australian income tax on the profits attributable to that PE.

What Are Nexus Rules?

Nexus rules define the minimum connection or “nexus” required between a person, activity, or asset and a taxing jurisdiction before tax obligations arise.

In the digital economy, nexus rules are evolving rapidly. Even without a physical presence, a foreign business may now be taxed in Australia if it:

  • Sells digital goods or services to Australian consumers

  • Has a “significant economic presence” in the Australian market

  • Exceeds sales or activity thresholds under GST or income tax rules

These concepts are increasingly relevant under the Base Erosion and Profit Shifting (BEPS) framework and digital services tax discussions.

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How Christopher Garlick Can Assist

Christopher John Garlick provides strategic legal guidance on PE and nexus issues, including:

  • Determining whether a foreign entity has a PE under Australian law or tax treaty

  • Advising Australian businesses expanding offshore on how to avoid inadvertent PEs

  • Assisting foreign companies doing business in Australia to assess and manage their local tax exposure

  • Supporting clients in ATO audits and disputes involving profit attribution and source rules

  • Analysing digital business models for compliance with evolving nexus and GST obligations

  • Common Risks Without Proper Advice

    • Unexpected Australian tax liabilities for foreign entities

    • Penalties for failing to register or report a PE

    • GST non-compliance for digital service providers

    • Misunderstanding source-based taxation rules

Doing Business Across Borders? Get PE & Nexus Clarity

Whether you’re a foreign business entering the Australian market or an Australian entity expanding globally, it’s crucial to understand when and where tax obligations arise.

Contact Christopher Garlick for legal advice on permanent establishment, nexus, and profit attribution issues.

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