“Place of effective management” means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.
A “permanent establishment ” (PE) is a fixed place of business that generally gives rise to income or tax liability in a particular jurisdiction.
Although a PE is a concept designed only for tax purposes, the tax administrations take this concept seriously, so a PE must be duly registered, and it is usually taxed as a separate legal entity. The practical meaning of a PE is that it creates a taxable presence for a company outside the company’s country of establishment.
The place of management, though considered a PE, requires existence of an office or similar facility in order to constitute a PE and the management activities should be conducted through such fixed place. In other words, to constitute a PE, the existence of physical presence is must.
