COVID-19 and permanent establishments

Are you a foreign company with employees in Australia? The ATO has updated its guidance on whether the presence of employees in Australia, due to the impacts of COVID-19, may create a permanent establishment (PE) for tax purposes.

The ATO says that it will not apply compliance resources to determine if you have a PE in Australia if:

  • you did not otherwise have a PE in Australia before the effects of COVID-19;
  • the temporary presence of employees in Australia continues to solely be as a result of COVID-19 related travel restrictions;
  • those employees temporarily in Australia will relocate overseas as soon as practicable following the relaxation of international travel restrictions; and
  • you have not recognised those employees as creating a PE or generating Australian source income in Australia for the purpose of the tax laws of another jurisdiction.

This approach will apply until 31 December 2021.

Tip!  Talk to your tax adviser if you are uncertain whether you have a PE in Australia. Your adviser can also let you know the tax consequences if you have a PE here.

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