13 April 2026 PE Watch | Latest developments and trends, April 2026 On 24 March 2026, a French Administrative Court of Appeal issued case No. 25NT01793, examining whether a company incorporated in Luxembourg had a permanent establishment (PE) in France on the basis of a place of management. The case concerned a Luxembourg company with shareholders and directors who maintained that the company's place of management and business was located in Luxembourg, while the French tax authorities argued that the company was, in substance, operated from France and therefore taxable there. As a preliminary matter, the case arose because the company had failed to file the required French tax returns and had not disclosed that it was carrying on an activity in France, which led the French tax authorities to treat the activity as undisclosed. As a result, a 10-year statute of limitations and 80% tax penalty applied to the reassessments. In its analysis, the court placed significant emphasis on where the company's economic and strategic activities were actually carried out. It found that the company's business was effectively developed from France, in particular through activities performed from premises located in France and by its director. These activities included the establishment of commercial networks and the execution of exclusive licensing agreements, which the court considered to be core functions of the business. By contrast, the company was unable to substantiate the existence of genuine operational or decision-making activity in Luxembourg, including evidence of invoicing, client activity or effective day-to-day management conducted from that jurisdiction. The court dismissed the relevance of a number of formal elements relied upon by the taxpayer, such as the holding of board meetings in Luxembourg, the fact that certain administrative expenses were incurred outside France and that bank correspondence was addressed to Luxembourg. It reiterated that such formal indicators cannot outweigh factual evidence demonstrating where effective management and business operations are actually exercised. On the facts of the case, Luxembourg could not be regarded as the place where strategic direction or commercial activity was carried out in practice, the court found. Based on this analysis, the court concluded that the Luxembourg company carried out key management and business activities from France. These activities constituted a PE in France based on place of management under French domestic law and the applicable tax treaty. On 30 March 2026, the New Zealand Government enacted the Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Act 2026 (the Act). The Act contains amendments aimed at boosting the New Zealand economy, supporting foreign investment in New Zealand infrastructure and easing tax obligations for new migrants and remote workers. Among other items, the Act notes that the activities of a nonresident visitor are disregarded when determining corporate tax residence of a foreign employer or associated entities (including under the center-of-management, director-control and head-office tests), and when assessing whether a nonresident enterprise has established a permanent establishment in New Zealand. A person visiting New Zealand is treated as nonresident for New Zealand tax purposes, provided the individual is present in New Zealand for 275 or fewer days within any 18-month period. This new rule allows visitors to work for their offshore employers; however, visitors cannot undertake work for New Zealand residents or work that requires physical presence in New Zealand and cannot sell any goods or services to New Zealand customers. Certain employment and professional services income earned by nonresident visitors is exempted if the services are performed for a nonresident; other New Zealand-sourced income remains subject to existing New Zealand tax rules.
Document ID: 2026-0849 | ||||
