PE domestic law

Algeria introduces changes to the taxation of permanent establishments

On 14 December 2025, the Finance Law 2026 was signed into law, introducing significant changes to the Algerian tax framework, including implications on permanent establishments (PEs).

Among other items, the new legislation clarifies that the branch tax is applicable on deemed distributed profits after the deduction of the corporate income tax (CIT) and is paid via the annual tax return. It also indicates that PEs registered in Algeria will be subject to the common tax regime as the option to apply the withholding tax regime has been removed.

In addition, the new legislation specifies that payments a PE makes to its head office or other offices of the same company (e.g., royalties, fees, commissions and interest) are not deductible to the extent they do not represent reimbursement of actual expenses.

See EY Global Tax Alert, Algeria | Finance Law 2026: Key tax and regulatory measures impacting foreign and Algerian companies, dated 21 January 2026.

Other PE developments

Indonesia introduces anti-abuse rules targeting PEs

On 30 December 2025, Indonesia issued Ministry of Finance Regulation (PMK) No. 112 of 2025 (Regulation), which updates the procedural framework for claiming tax treaty benefits. Though the regulation is primarily procedural, it also strengthens the way the Indonesian tax authorities assess PE risk in treaty cases.

From a PE perspective, the Regulation introduces more detailed anti-avoidance guidance intended to prevent structures designed to avoid the existence of a PE. This includes dependent agent and commissionaire-type arrangements, in which a PE may be recognized if Indonesia-based personnel or representatives play the principal role leading to the conclusion of contracts that are routinely finalized by the foreign enterprise without material changes. The Regulation also tightens the application of the preparatory or auxiliary activity exemption, placing greater emphasis on the substance and functional contribution of activities performed in Indonesia, including situations in which activities are fragmented across closely related parties.

In addition, the Regulation introduces a contract-splitting rule for Construction PEs. Time thresholds must be assessed by aggregating presence days — if each presence exceeds 30 days and the projects are carried out at the same location — across the foreign enterprise and its closely related persons, generally based on more than 50% ownership or common control.

It remains to be seen how the Directorate General of Taxes will apply these regulations in situations in which the relevant tax treaty has, or has not, been modified by the Multilateral Instrument (MLI) provisions expanding PE definitions.