What Is a Dependent Agent?
A Dependent Agent is a person acting for a foreign enterprise whose habitual contracting activity can create a treaty permanent establishment, as each treaty defines.
Also known as: Dependent Agent PE, Agent Not of Independent Status.
How Dependent Agent works
A Dependent Agent is an individual or company, not necessarily an employee, which acts on behalf of a non-resident enterprise and habitually concludes contracts, or plays the principal role leading to contracts, so the enterprise can have a permanent establishment in the agent's country without any fixed place of business. HMRC applies the 2017 OECD principal role test for chargeable periods from 1 January 2026, replacing the earlier authority-to-conclude test. Activities limited to preparatory or auxiliary functions generally do not create such a permanent establishment. Wording differs between treaties, depending on whether the Multilateral Instrument or newer text applies, so the relevant treaty decides.
Dependent Agent vs Agency Permanent Establishment
Unlike an Agency Permanent Establishment, which is the taxable presence created for the enterprise, a Dependent Agent is the person whose activity creates that presence.
Example
Illustrative example: A company resident in Country A sells software licences, and its sales director lives in Country B, where the director negotiates terms with clients and the head office signs without changes. Under a treaty applying the principal role test, the director may be a Dependent Agent, creating a permanent establishment in Country B to which profits are attributed.
Common misconception
Myth: A company avoids a permanent establishment as long as all contracts are signed at head office.
Reality: Under the principal role test, a Dependent Agent can create a permanent establishment where the agent leads negotiations routinely concluded without material modification, even if signature happens elsewhere.
Frequently asked questions
Can a dependent agent create a permanent establishment?
A Dependent Agent can create a permanent establishment for a foreign enterprise where the agent habitually concludes contracts or plays the principal role leading to contracts, subject to the wording of the applicable tax treaty.
What is the principal role test?
The principal role test, introduced in the 2017 OECD Model, treats a person leading negotiations for contracts routinely concluded without material modification as a Dependent Agent, even without formal signing authority.
Related terms
- Agency Permanent Establishment — Taxable presence created by a dependent agent
- Permanent Establishment (PE) — Umbrella concept for taxable business presence abroad
- Fixed Place of Business — Alternative permanent establishment route needing physical premises
- Permanent Establishment Risk — Exposure assessment where agents act abroad
- Multilateral Instrument (MLI) — Instrument which updated many treaties' agent wording
Related guides
- Tax treaties and international taxation — Treaty framework defining dependent agents
- Setting up and managing a digital nomad business — Remote business set-ups where agent risk arises
Sources
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
