You want borderless work, not borderless tax bills. Here’s the line between freedom and liability: permanent establishment for digital nomads. If a country decides your roaming laptop is actually a taxable “office,” your company can face corporate tax, payroll duties, and penalties you didn’t budget for.
As remote work becomes the norm, enforcement around cross-border tax exposure is heating up — governments are hunting for overlooked PEs that drain revenue. Digital nomads and small-service firms are uniquely vulnerable because their “office” moves with them; a coworking lease or friendly long-term client can quietly create corporate and payroll liabilities. This piece gives nomads crisp, non-jargon tactics and sounds the alarm while positioning JLW as the practical expert to prevent costly surprises.
PE in Plain English
What is permanent establishment for digital nomads?
Permanent establishment (PE) is a tax law trigger. If a business has a sufficiently fixed place or a person in-country doing core revenue work with authority, that country can tax the business on profits attributable to the local activity.
Most tax treaties follow OECD principles: a fixed place of business, or a dependent agent with authority to conclude contracts, equals PE. Some countries add a “services PE” if you or your team perform services on the ground beyond a set day threshold.
Common Tripwires
Fixed place: home base, rentals, and coworking
A home office used regularly for client delivery can be a “fixed place.” Long-term apartment leases with dedicated workrooms strengthen the case. Coworking memberships are not automatic PE, but a dedicated desk or branded room used consistently looks like an office.
Watch for local registrations: utility bills, signage, or mail reception in the company’s name suggest permanence. The more your operations rely on that location, the hotter the risk.
Dependent agent and contract authority
If you habitually negotiate or sign client contracts while in-country, you may act as a dependent agent. You don’t need a fancy title; substance beats labels. Repeatedly concluding deals on local soil can establish PE even without an office.
Solutions include removing local authority to conclude contracts and shifting final acceptance and signature to your home jurisdiction. But you must back it with real process, not cosmetics.
Services PE and day counts
Many treaties and domestic laws create PE if services are performed in-country for, say, 90–183 days within a 12‑month period, alone or across related projects. Day counting is brutal: partial days often count, and multiple team members’ days can aggregate.
Short intense projects can add up. Staggering presence across borders helps, but careful tracking is mandatory.
Payroll and employer obligations
PE risk often drags payroll obligations along. If you or your staff are deemed to be working for the company in-country, you could owe withholding, social security, and labor registrations. Ignoring this can compound liabilities with penalties.
PE-Proof Tactics That Actually Work
Anchor your core operations elsewhere
Keep management, key systems, and critical decision-making in a chosen home base. Board meetings, accounting, IP ownership, and key servers should point to that jurisdiction. Document it.
If your business scales, consider a holding company with a clear operational subsidiary. Consistency across contracts, invoices, and communications matters.
Structure contracts to control nexus
State governing law and contracting location in your home base. Route signature via e-signature servers tied to that jurisdiction. Avoid “boots-on-the-ground” statements in proposals; focus on outcomes, not physical presence.
Make it explicit that in-country meetings are incidental, and final acceptance occurs outside the client’s country. Then stick to it in practice.
Manage your travel cadence
Track days by country and by project. Build buffers below local thresholds for services PE. If a client project requires extended on-site work, consider a short-term registration or a compliant local partner rather than tempting fate.
Split deliveries: discovery on-site, execution remote. Rotate team members to avoid aggregating day counts where rules allow.
Use intermediaries wisely
Employer of Record (EOR) or agent-of-record setups can deflect payroll risk when you truly need local presence. They don’t erase PE by themselves, but they can align withholding, social security, and contracts with reality.
For sales, consider independent agents with genuine entrepreneurial risk, not disguised employees. Paper alone won’t save you—substance rules.
Coworking without the PE headache
Choose hot desks, not dedicated rooms. Don’t display company signage, receive official mail, or hold inventory. Use generic rooms for meetings and rotate locations if you’ll be in-country for a while.
Keep business-critical systems and storage outside the host country. Your laptop is fine; a server rack is not.
Document everything
Maintain a travel ledger with entries, exits, purposes, and project codes. Archive agendas, e-sign trails, and acceptance confirmations showing decisions finalized in your home base. If audited, contemporaneous records beat memories.
Review quarterly. The moment your patterns change, reassess risk before tax authorities do it for you.
VAT/GST and indirect tax aren’t optional
Even without PE, you can trigger VAT/GST registration by selling digital or professional services to local customers. Know place-of-supply rules and thresholds, and use compliant invoicing. Indirect tax audits often surface PE questions—don’t let sloppiness open that door.
When Saying “Yes” to PE Is Smart
Entering a market intentionally? Register a branch or entity, run compliant payroll, and charge local VAT. This can legitimize larger contracts, enable local hiring, and reduce audit noise.
Model the profit impact first. Sometimes a small local margin with clean compliance beats perpetual anxiety and deal friction.
Real-World Snapshots
- Solo UX designer in Lisbon: hot-desk only, no contract authority on-site, signatures routed to UK Ltd. Tracks 60 days. Low PE risk under common treaties.
- Agency lead in Mexico City: dedicated office and months of on-site sprints. Services PE likely. Solution: EOR for local staff and project-based branch registration.
- Sales consultant in Berlin: habitually negotiates and signs retainers while in Germany. Dependent agent exposure. Fix: remove signing authority in-country; finalize remotely.
Your PE-Proof Nomad Checklist
- Designate an operational home base and keep management there.
- Control who signs, where, and how. E-sign from home jurisdiction.
- Limit dedicated space; avoid signage, mail, and inventory in host countries.
- Track days by project and country; plan buffers below thresholds.
- Use EOR/agents when presence is necessary; keep substance aligned.
- Invoice correctly for VAT/GST; don’t let indirect tax trip audits.
- Quarterly review with a cross-border pro. Adjust before authorities do.
Cut Through the Noise
If you take one thing away, take this: understand the rules on permanent establishment for digital nomads, document your operating reality, and design around the tripwires. That’s how you keep profits where they belong and sleep at night.
JLW Business Advisors is built for bold, mobile operators. We map your risk, set practical guardrails, and, when it’s time, set up local compliance without drama. Stay agile, stay compliant, and keep your money working for your strategy—not the penalty column.