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Q:
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What is the relationship between the two?
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A:
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Permanent establishment and institutional premises are definitions of the establishment of a non-resident enterprise based on different legal language. Generally speaking, a permanent establishment must be an institutional premises, but an institutional premises is not necessarily a permanent establishment.
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Q:
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What is a permanent establishment?
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A:
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A permanent establishment is a concept in international law that is used primarily to determine the right of one party to a tax treaty to tax the profits of an enterprise of the other party. Generally speaking, a permanent establishment is a relatively fixed place of business, which needs to be substantially present, relatively fixed and of some continuity in time, and engaged in all or part of its business activities. Depending on the definition and characteristics of a permanent establishment, it may be classified as a general permanent establishment, an engineering permanent establishment, a labour permanent establishment and a non-independent agency permanent establishment.
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What are institutional premises?
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Establishments are a concept in domestic law and include, in particular, management bodies, business establishments, offices, factories, farms, places where natural resources are exploited, places where labour is provided, places where construction, installation, assembly, repair, exploration and other engineering work is carried out and other establishments and places where production and business activities are carried out.
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Can an individual constitute institutional premises?
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If a non-resident enterprise commissions a business agent to carry out production and business activities in China, including commissioning an entity or individual to enter into contracts, or to store or deliver goods on its behalf on a regular basis, the business agent is likewise considered to be an establishment or venue set up by the non-resident enterprise in China.
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How is it determined in practice?
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An enterprise needs to determine whether it has established a place of establishment in the country in accordance with national law and then whether that place of establishment constitutes a permanent establishment in accordance with international law. An establishment usually constitutes a permanent establishment if it has the characteristics of being fixed, continuous and operational at the same time.
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FAQ
