ATAX – Nov 2018 – L3 – Q3b – International Taxation

Permanent Establishment (PE) under the Nigeria-UK Double Taxation Agreement

Question

b) Double taxation agreements exist among Nigeria and some foreign countries.

Required:
Explain the term “Permanent Establishment” as contained in the double taxation agreement between Nigeria and the United Kingdom.
(5 Marks)

Answer

Definition:
A Permanent Establishment (PE) constitutes a fixed place of business where an enterprise conducts its operations either fully or partially. Examples under the Nigeria-UK Double Taxation Agreement include:

Offices, branches, factories, and extraction sites such as oil and gas wells.
A construction or installation project that lasts beyond 12 months.
Agents with the authority to finalize contracts on behalf of the enterprise.

Tax Jurisdiction:
PE status grants Nigeria the authority to tax income derived from business operations within its territory. Profits not associated with a PE are only taxed in the country where the enterprise resides, but any profits attributed to a PE will be taxed in Nigeria.

Tags: Double Taxation Agreements, Foreign subsidiary, International Contracts, Nigerian Tax Laws, Permanent Establishment, Tax liabilities, Withholding Tax
Level: Level 3

Topic: International taxation

Uploader: Kofi