The Danish tax authority has issued a ruling (22 Oct 2021 SKM2021.546.SR) refusing to confirm no Permanent Establishment where a foreign company employed a sales rep, working from his home in Denmark, carrying out sales activities for customers in Sweden, Finland, and Norway.
Emphasis was placed on the fact the employee had a central sales function with an objective of developing the Nordic market and therefore the employees geographical location in the region had an independent value – irrespective of the fact he was not focused on customers in Denmark. This meant that the fact that the employee performed part of his work from Denmark was not solely due to private circumstances. He was considered to be carrying out an income generating activity (sales) from his home office in Denmark such that there could be a Fixed Place Of Business.
The tax authority did not focus on the fact there was no Danish source revenue. Instead the tax authority focused on the economic value to the company of having any employee in that geographic location (i.e. the Nordics). This serves as a clear warning to think more widely than simply giving a risk assessment on whether local revenues are or aren’t being generated. It also appears that tax authorities are increasingly focused on differentiating the business drivers for the employee location from the personal/private circumstances. While it is helpful to have the example that regard would be taken to location choice being purely for personal circumstances, differentiating when the location might have an independent value, especially considering regions not just countries, will be more complex.
Also of interest in the decision: