International tax treaties generally allow a government to tax a non-resident firm that maintains a permanent residence in the treaty country.

Question

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International tax treaties often include provisions for taxing non-resident firms that have a permanent establishment (PE) in the treaty country. The definition of a PE varies by treaty, but can include fixed places of business, agents with the authority to conclude contracts, and construction or installation projects that last for a certain amount of time. Once a non-resident firm has a PE in a treaty country, that country can generally tax the profits attributable to the PE. However, the tax rate may be limited by the treaty, and the firm may be able to avoid double taxation by claiming a credit for foreign taxes paid.

International Tax Treaties Generally Allow a Government to Tax a Non-Resident