What Is a Fixed Place of Business?
A Fixed Place of Business is a permanent establishment test under which a durable business location creates taxable presence, subject to treaties and national law.
Also known as: Fixed Place of Business Permanent Establishment, Fixed Place PE.
How Fixed Place of Business works
A Fixed Place of Business exists, under Article 5(1) of the OECD Model Tax Convention and national laws modelled on it, where an enterprise has a place of business at a specific geographical point, with a degree of permanence, through which the business of the enterprise is wholly or partly carried on. United Kingdom law, in section 1141 of the Corporation Tax Act 2010, lists non-exhaustive examples such as a place of management, a branch, an office, a factory and a workshop, and HMRC guidance links each condition to the treaty commentary. Permanence is assessed on the facts: HMRC guidance notes that a place maintained for less than six months is generally not treated as a permanent establishment, although recurring patterns can change the result, and construction projects follow a separate twelve-month rule in many treaties. The place need not be owned; premises at the enterprise's disposal, including space used regularly by staff, can qualify, while activities of a purely preparatory or auxiliary character are excluded, subject to anti-fragmentation rules. Once a fixed place of business exists, the host country may tax the profits attributable to it, and the outcome depends on the applicable treaty, domestic law and the facts of each case.
Fixed Place of Business vs Agency Permanent Establishment
Unlike an agency permanent establishment, which arises from a person habitually concluding or principally negotiating contracts for the enterprise, a Fixed Place of Business permanent establishment arises from premises used durably for the business, regardless of contract activity. Both tests can apply to the same enterprise in the same country.
| Fixed Place of Business | Agency Permanent Establishment | |
|---|---|---|
| Basis of nexus | Physical place of business with a degree of permanence | Activities of a dependent agent acting for the enterprise |
| Treaty provision | Article 5(1) of the OECD Model, with examples in Article 5(2) | Article 5(5) of the OECD Model, as revised in 2017 in many treaties |
| Key test | Place, fixed in location and time, through which business is carried on | Habitually concluding contracts or playing the principal role leading to them |
Example
Illustrative example: A company incorporated in Country A has one director, who moves to Country B and works full time from a rented apartment there, holding client meetings and taking strategic decisions. The apartment is a specific geographical point, has been used for more than six months (illustrative, following HMRC guidance on permanence), and the company's core business is carried on there rather than preparatory work. Country B's tax authority may therefore consider the apartment a fixed place of business and seek to tax the profits attributable to the director's activity, subject to the treaty between Country A and Country B. Had the director spent a few scattered weeks in Country B each year without a recurring pattern, the permanence condition would generally not be met, which shows how duration and regularity drive the result. The same facts may also raise questions of company residence through the place of effective management, which is a separate test and can apply even where no permanent establishment arises.
Common misconception
Myth: A home office or co-working desk cannot create a permanent establishment because nothing is owned or registered locally.
Reality: A Fixed Place of Business does not require ownership, registration or signage, and premises used regularly for the enterprise's core business may qualify depending on treaty commentary and local practice.
Frequently asked questions
What is a fixed place of business for PE purposes?
A Fixed Place of Business, for permanent establishment purposes, is a specific location with a degree of permanence through which an enterprise carries on all or part of its business, such as an office, branch or place of management.
Can a home office be a fixed place of business?
A Fixed Place of Business can include a home office in some cases, depending on regular use for the enterprise's business, treaty commentary and local practice; HMRC states that remote working is not automatically exempt.
How long must a place exist to be a permanent establishment?
A Fixed Place of Business has no single universal duration test; HMRC guidance notes that a place kept for less than six months is generally not a permanent establishment, while recurring use can change the outcome.
Related terms
- Permanent Establishment (PE) — Umbrella concept of which fixed place is the core test
- Agency Permanent Establishment — Alternative PE test based on dependent agents
- Permanent Establishment Risk — Exposure created by staff working abroad
- Attribution of Profits — Determines profits taxable once a PE exists
- Place of Effective Management (POEM) — Separate test for company residence
Related guides
- Tax treaties and international taxation — Treaty rules defining permanent establishment
- Incorporation options for location-independent entrepreneurs — Company set-ups exposed to PE questions
Sources
- legislation.gov.uk, Corporation Tax Act 2010 section 1141
- HMRC International Manual INTM264300
- HMRC International Manual INTM264430
- HMRC International Manual INTM264435
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
