Permanent establishment risk for a remote-managed EU company
You operate a company incorporated in one EU country. The legal structure is formalised and compliant: the company is registered locally, filings are submitted, and the statutory seat is maintained. At the same time, the company is managed remotely. Directors, founders, or key decision-makers live and work from other EU countries and exercise operational and strategic control online. There are no offices, employees, or formal registrations outside the country of incorporation. Management activity is performed digitally and often across borders. You assume that corporate taxation follows the place of incorporation and that remote management does not create additional tax exposure. In practice, tax authorities assess where effective management and control are exercised — not where the company is registered.
Input Data
- Company type: EU-incorporated company
- Country of incorporation: single EU jurisdiction
- Management location: directors or founders located in other EU countries
- Decision-making: strategic and operational decisions taken remotely
- Physical presence: no offices or staff outside incorporation country
- Management pattern: habitual or long-term remote control
- Assumption: incorporation determines corporate taxation
Jurisdiction Conflict
Country of incorporation — formal corporate residence
- Company registered and compliant locally
- Statutory filings and accounts maintained
- Assumption of exclusive taxing rights
Country of management — effective control risk
- Directors habitually operate from this country
- Key decisions taken locally
- Indicators of management and control present
Treaty and domestic law tension
- Different interpretations of "place of effective management"
- Permanent establishment concepts applied without physical presence
- Overlapping corporate tax claims
The conflict is not about premises or personnel. It is about where the company is actually run.
AI Analysis
Scenario A — Management permanent establishment asserted
- Tax authority treats management activity as sufficient
- Corporate profits attributed locally
- Risk: unexpected corporate tax exposure
Scenario B — Dual corporate residence
- Two countries claim taxing rights
- Treaty tie-breaker applied inconsistently
- Risk: double taxation disputes
Scenario C — Retroactive reassessment
- Past years reviewed based on management patterns
- Taxes, penalties, and interest assessed
- Risk: historical exposure materialises
Key risk indicators
- Directors residing long-term outside incorporation country
- Board and management decisions taken from the same foreign location
- Absence of substantive decision-making in the registered state
- Operational control exercised remotely
- Internal documentation not reflecting actual management
- Mismatch between legal structure and factual conduct
Output of Richys AI Analysis
- Mapping of management and control locations
- Identification of permanent establishment triggers
- Treaty tie-breaker stress testing
- Assessment of factual versus formal governance
- Detection of high-risk management patterns
- Exposure estimation by jurisdiction
Expert Boundary
Involvement of a verified EU expert is required for:
- country-specific rules on management and permanent establishment
- interpretation of tax treaties and tie-breaker tests
- defensive structuring of management activity
- interaction with corporate tax authorities
Case Conclusion
Permanent establishment arises from management, not from offices or employees.
If key decisions are taken from another country on a stable basis, tax authorities focus on that location — regardless of where the company is incorporated.
The issue is not remote work itself. The issue is when remote management becomes habitual and factually identifiable.
Tax risk here is driven by a false assumption: that digital management has no tax consequences.
A structured case analysis identifies where management is already considered exercised, which actions trigger PE risk, and when expert intervention is required before corporate tax exposure turns into formal assessments.
Start case analysisThis case is for illustration purposes only. Real outcomes depend on residence, income structure, documents and timing. For your specific situation, use structured case analysis with AI and verified EU experts.
Sophie Bizelle
AI assistant – Business Setup