Tax Advice Quotation to a Permanent Establishment in Cyprus

CLIENT ENQUIRY

Dear Kyriacos, 

The client is currently employing through its cy entity an employee in CY. The Cyprus company will be closing down but the group wants to continue employing the individual who will continue to be based in CY. 

The only viable option identified to do that is through employing him by an EU entity of the group (probably a German company) - See option 3 of our mail to them. 

The client wants to know more on permanent establishment risk/considerations that the German company will have due to this arrangement. 

Of course you can ask any additional questions that may be relevant in order to provide your note on the matter. 

The client already noted that ABC Limited's tax team considers the PE low risk generally since its German entity (that would employ this individual) doesn't generate any revenue outside of intercompany service agreements.  It may, therefore, largely be a hypothetical risk but they need us to provide some further guidance to allow the client to understand the potential impact. They are also asking if registering a branch of the German entity and the branch to employ the individual will make any difference to the PE considerations. 

Hope this is clear and waiting for your confirmation, fees and timelines. 

Hi,

Thanks again for the below. 

The client would like some further information around the impact from a PE perspective if hiring the individual as a direct employee of one of their EU entities.  The client would like this to cover  both the different scenarios (i.e. registering a branch office versus not registering one) but presumably this distinction doesn’t make any difference to the potential impact (i.e. if PE is  triggered), it is only relevant to determining whether the PE is triggered in the first place, but please confirm. 

Could you please provide some additional information around the potential PE impact (recognising that you will need to work with colleagues/ external tax counsel)?

ABC Limiteed's tax team considers the PE low risk generally since its German entity (that would employ this individual) doesn't generate any revenue outside of intercompany service agreements.  It may, therefore, largely be a hypothetical risk but could you please provide some further guidance to allow the client to understand the (potential and if different likely practical) impact for completeness?

Kind regards 

Hello

Our tax advice in writing on the matter would be Euro 1,600 + VAT. We will have it ready before the end of next week.

Thank you,