Permanent establishment

The term permanent establishment is defined in the Nordic tax treaty. Permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. The term permanent establishment includes especially:

  • a place of management
  • a branch
  • an office
  • a factory
  • a workshop, and
  • a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

A building site or a construction, installation or assembly project, or activities consisting of planning, supervising, consulting or other auxiliary work by personel connected with such a project, constitutes a permanent establishment only if the project last more than 12 months and is carried out in the same place.

When a person is acting in another Nordic country on behalf of an enterprise and he has, and habitually exercises, an authority to conclude contracts in the name of the enterprise, the enterprise shall be deemed to have a permanent establishment, so-called dependent agent.
An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

Hiring-out of labour

Hiring-out of labour is defined in the Nordic tax treaty. An employee shall be deemed to be hired out if he is placed at another person's disposal by a person (the hiring-out employer) to carry out work in the business of such other person (the principal), situated in another contracting State, provided that the principal is resident or has a permanent establishment in that other State, and that the hiring-out employer has no responsibility and does not bear any risk in respect of the result of the work.

In determining whether an employee shall be deemed to be hired out, a comprehensive review shall be carried out, with particular reference to whether:

  1. the ultimate control of the work rests with the principal;
  2. the work is performed at a place which is at the disposal of the principal and for which he has responsibility;
  3. the remuneration of the hiring-out employer is calculated according to the time used or with reference to any other relationship between the remuneration and the wages received by the employee;
  4. most tools and materials are supplied by the principal; and
  5. the hiring-out employer does not decide unilaterally on the number of employees or their qualifications.