“Permanent establishment” is a fixed place of business, through which the business of an enterprise is wholly or partly carried on. This definition, therefore, contains the following conditions:
- the existence of a “place of business”, i.e. a facility such as premises or, in certain instances, machinery or equipment;
- this place of business must be “fixed”, i.e. it must be established at a distinct place with a certain degree of permanence;
- the carrying on of the business of the enterprise through this fixed place of business. This means usually that persons who, in one way or another, are dependent on the enterprise (personnel) conduct the business of the enterprise in the State in which the fixed place is situated.
Profits from a Permanent Establishment abroad are exempt from tax. The exemption does not apply if the Overseas Permanent Establishment:
- Engages directly or indirectly by more than 50% in activities that lead to investment income and
- The overseas tax burden on its income is significantly lower than the Cyprus tax burden (less than 5%)