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February 3, 2022

PE Watch | 2021 in review

The permanent establishment (PE) concept is a core element of the global international tax framework. With increasing cross-border business activities resulting from the globalization of the world economy, the PE risk is taking center stage among international tax issues. At the same time, the attribution of profits to PEs becomes more complex due to new business models, ecosystems and integration of operations within a business model. However, the attribution of profits to PEs also gains particular importance for the ramifications that it will have on the Global Anti-Base Erosion (GloBE) rules calculations when applicable.

To address the challenges arising from the digitalization of the economy, some jurisdictions have modified their domestic tax rules in an attempt to levy tax on business arrangements not requiring a physical nexus, including the triggering of a PE when certain services are provided from abroad for the benefit of a person resident in their jurisdiction. Such new concepts and approaches depart from the traditional views of PE.

Looking forward, a number of developments impacting PE assessments are expected. This EY publication, attached below, covers the most relevant PE topics during 2021, broken out into five areas: (i) BEPS 2.0; (ii) COVID-19; (iii) domestic law; (iv) BEPS multilateral instrument; and (v) controversy.


PE Watch | 2021 in review