Types of permanent establishment describe the different ways a company's presence abroad can become taxable there. The classic categories are a fixed place of business, a dependent agent who habitually concludes contracts, and in many treaties a service presence that persists long enough. The boundaries are set by local law and treaties together, which is why the same activity can create a PE in one country and not in another.
Fixed place of business
The core type is a fixed place through which business is carried on. PwC's China summary illustrates how broadly domestic law can draw it: establishments include management organisations, business organisations, representative offices, factories, farms, places where natural resources are exploited and places where labour services are provided. An office, a workshop or in some readings even a consistently used home workspace can qualify, subject to treaty carve-outs for purely preparatory or auxiliary activity. The test is function, not signage.
Dependent agent and service types
A dependent agent PE arises when someone in-country habitually exercises authority to conclude contracts on the company's behalf; PwC's China pages describe business agents who regularly sign contracts, store and deliver goods for the foreign enterprise as an example. Service PE clauses in many treaties capture projects where personnel provide services in-country beyond a duration threshold. Domestic law can be stricter than the OECD model: PwC notes Turkey applies no minimum period of presence at all, with each case judged on its merits.
What this means for hiring through an EOR
An employer of record answers the employment-law question: who lawfully employs the person. It does not by itself answer the tax question, because a PE turns on what the person does. An employee who negotiates and habitually closes deals can create agent-type exposure whoever their legal employer is, while a role kept to internal delivery generally sits safer. The practical discipline is to define the role before hiring, take treaty advice where revenue is generated, and re-check when the role grows. Nothing here is tax advice; local advice and the treaties control.
Questions people ask about types of permanent establishment
Does using an employer of record prevent a permanent establishment?
No. It solves lawful employment without an entity. PE risk follows the employee's activities, especially contract negotiation and revenue generation, and needs its own assessment.
Can a home office be a permanent establishment?
In some jurisdictions and fact patterns, yes: a home workspace used regularly and at the company's disposal can be argued as a fixed place. Treaties and local practice decide.
Are the types the same everywhere?
The categories are similar but the thresholds are not. Turkey applies no minimum presence period, per PwC, while treaty countries may apply duration tests; each country pairing needs its own reading.