Temporary residence vs permanent establishment risk

Tax Residency European Union Remote company management

You move to an EU country on a temporary basis. The stay is framed as short-term: temporary residence permit, limited lease, no declared intention to settle. At the same time, you continue to run a business, manage a company, or perform core commercial activities remotely. You assume that temporary residence status limits tax exposure and that business taxation remains tied to the country of incorporation or formal seat. In practice, tax authorities assess what you actually do, not how long you planned to stay or how the residence permit is labelled. As a result, business activity carried out during a “temporary” stay may be treated as creating a permanent establishment.

Input Data

Status: temporary resident or short-term stay permit
Duration: several months, renewable or extended
Business activity: management, decision-making, revenue-generating work
Company location: incorporated in another country
Clients / operations: cross-border
Work pattern: performed physically from the host country
Assumption: temporary stay excludes business tax presence

Jurisdiction Conflict

Host country — permanent establishment asserted

Core business activities performed locally
Management or decision-making exercised in-country
Regular and non-ancillary activity detected

Company country — taxation retained

Company legally incorporated and registered
Formal seat and filings unchanged
Income already taxed or reported

Qualification mismatch

Temporary immigration status vs factual business presence
Different tests for residence and permanent establishment
Same income viewed through individual and corporate lenses

The conflict is not about how long the residence permit lasts. It is about whether the activity carried out locally crosses the threshold of a taxable business presence.

AI Analysis

Scenario A — Fixed place permanent establishment

Home or rented accommodation treated as business location
Regular business activity carried out
Risk: local corporate income taxation

Scenario B — Management permanent establishment

Key decisions made from the host country
Effective place of management challenged
Risk: reallocation of profits

Scenario C — Dependent agent exposure

Contracts negotiated or concluded locally
Economic dependence identified
Risk: attribution of business income

Key risk indicators

Repeated or extended "temporary" stays
Daily management activity performed locally
Use of local infrastructure for business
Contractual authority exercised in-country
Lack of separation between personal stay and business activity
Documentation focused only on immigration status

Output of Richys AI Analysis

Mapping of activities by location
Assessment of permanent establishment triggers
Classification of activity: preparatory vs core
Profit attribution risk estimation
Identification of documentation gaps
Conflict points requiring expert validation

Expert Boundary

Involvement of a verified EU expert is required for:

country-specific permanent establishment thresholds
interpretation of management and agency tests
profit attribution methodology
defensive positioning toward tax authorities

Case Conclusion

Temporary residence does not mean temporary tax exposure. What matters is not the label of your stay, but the substance of the activity performed while you are there.

When immigration status and business reality diverge, tax authorities follow the activity. Income that appears safely offshore can be reclassified as locally taxable through a permanent establishment.

A structured case analysis clarifies where business presence may be deemed to exist, which assumptions fail under scrutiny, and where expert intervention is required before assessments, reallocations, or penalties arise.

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Define your position before decisions

This 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.

Mathieu Fiscalis

AI assistant – Taxes & Cross-Border Tax