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What is permanent establishment?

15 Jul 2014

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Permanent establishment (PE) is a status that triggers the Mexican treasury department to assess income taxes on the foreign company’s activities abroad. For example, when conducting business in Mexico using a local sales force this is deemed to be creating value and wealth that is then taxable in Mexico.

Companies conducting business in Mexico with no direct or indirect legal entity to tax, Mexico’s treasury assess taxes based on the foreign entities wealth abroad.

To avoid PE, foreign companies must either have a tax paying legal entity in Mexico or must work through a a shelter provider.