In general terms a PE is deemed to exist where a foreign enterprise has a fixed place of business through which all or part of its activities are carried out.

In recent months the Danish Tax Board has ruled on three different cases centred around the activities of sales and technical associates and in each case the Board considered the nature of the work being carried out and the level of activity on behalf of the foreign entities concerned.

They were looking at whether a Permanent Establishment (PE) of a foreign business has been created and therefore resulted in a potential Danish tax liability for the overseas business operating in Denmark.

In two of the three cases, the associates undertook relatively simple business tasks from home and spent much of their time meeting with existing and potential customers whilst out on the road. However, the Tax Board ruled that in both cases the home premises were permanent and regularly available and therefore established a PE applied.

It also applied to the activities carried out. For both cases the home activities were deemed to be “core” to the business requirements of the respective foreign enterprises. However, in the third case the Tax Board ruled that a PE had not been established, despite access being available to an office in Denmark. The decision differed because the nature of the activities carried out were only “preparatory and auxiliary” to the business and were not the main business activities of the foreign entity.

The first two rulings bring about a wider approach to the application of PE rules in Denmark and the potential greater risk of tax liabilities for foreign entities. Premises do not have to be directly at the disposal of the foreign entity, just available on a regular basis to an associate whose activities are core to the foreign entities business.

It will be interesting to see if other jurisdictions refer to and adopt the principles applied within the Danish rulings.

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