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Permanent establishments

Provides a brief overview of how tax applies to permanent establishments in Australia and overseas.

Last updated 25 October 2016

Your enterprise can be taxed in Australia even if it does not reside here. Reciprocally, an Australian enterprise can be taxed overseas even though it is not resident there. Under our double tax agreements (DTAs), if your enterprise carries on business through a permanent establishment under either scenario above, taxation may apply. Such tax will apply only to the extent that the profits are attributable to the permanent establishment.

A permanent establishment is generally defined in Australia's DTAs as being a fixed place of business through which the business of the enterprise is carried on in whole or part. The term is defined broadly in Australia's DTAs. It usually includes a branch, office, workshop- even the furnishing of services for certain periods of time.

Each place of business which falls within the appropriate DTA's definition of a permanent establishment will constitute a separate permanent establishment.

Where a permanent establishment exists, the profits attributable to that permanent establishment will be calculated using certain arm's length principles.

For more information about how Australia’s attribution rules operate, please refer to Taxation Ruling TR 2001/11 - Income tax: international transfer pricing.

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