Definition of a permanent establishment

1. Material permanent establishment

A permanent establishment may exist if the company in Belgium has a material space at its disposal (owned, rented or otherwise).

The term “material permanent establishment” includes especially:

  • a place of management;
  • a branch;
  • an office;
  • a factory;
  • a workshop; and
  • a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.


We note that the Belgian tax authorities have increased their investigative activities with respect to foreign companies performing activities/projects over a long period of time (longer than 6 months) or on a recurrent basis over a longer period of time for the same client or at the same geographical location in Belgium. In such cases, the Belgian tax authorities may decide that the company has a taxable material permanent establishment in Belgium.

For example, the mere fact that your company has a certain space in Belgium (e.g. workshop of the client) that it uses for its business activities may suffice to constitute a material permanent establishment. In this context, it is also not required that this space (buildings, facilities, installations, etc.) is owned or rented by, or otherwise at the disposal of your company.

Based on the exact facts, if desired, we can check if there is an actual risk that the activities carried out may give rise to a taxable permanent establishment in Belgium.

In addition, for the sake of completeness, we note that in certain situations a home office may also constitute a material permanent establishment. However, this analysis is highly dependent on the concrete facts and circumstances. An important element here is that the home office must be “at the disposal” of the company for it to constitute a material permanent establishment. In many cases, the conduct of business activities at the employee’s home will be so occasional that the home office is not considered to be at the disposal of the enterprise. However, where a home office is continuously used to carry out business activities for an enterprise and the facts and circumstances show that the enterprise has required the individual to use that place to carry out the activities of the enterprise (for example, by not providing an employee with an office in circumstances where the nature of the work clearly requires an office), the home office may be considered to be at the disposal of the enterprise.


2. Construction sites or construction works or installation works

The place of execution of a construction site or of construction works or installations works becomes a Belgian permanent establishment which gives rise to file a Belgian non-resident tax return as soon as the duration exceeds 30 days.

In addition, on-site planning activities and the management or supervision of construction activities are also included in the definition of construction works. Earthworks are also explicitly covered by this provision.

Based on the double tax treaty with the country of origin of the company in question, Belgium will only be authorised to levy tax if this exceeds a longer duration. In general a period of 12 months is applicable, but by way of exception, a number of double tax treaties state a shorter period (for example 6 months).

This covers both projects that have exceeded the 12 month period in the year 2022 and projects that started in the year 2022 and will exceed the 12 month period later on (for instance in 2023).

For the calculation of the duration of a construction site or of construction works or installation works, the following rules have to be taken into account:

  • the period starts from the moment the first preparatory works take place on Belgian territory;

  • separate construction sites or separate construction works or installations works should not be added together for the calculation of the minimum duration according to the treaty in question (for example 12 months)

  • in principle, different projects will be deemed to be ‘separate works’ if they are carried out on behalf of different clients, unless the projects form a coherent whole from an economic point of view;

  • different projects carried out for the same client based on one single contract will be treated as one project (unless the projects are not carried out coherently);

  • different projects carried out on behalf of the same client based on several contracts, will form one project if the different projects, although performed in different locations, form a part of a bigger whole and if there is no substantial interruption between the different projects;

  • the execution of coherent activities that are carried out by group companies for the same construction site, construction work or installation work, whether or not during different periods of time, must be motivated by commercial motives.

It should be noted that, in the context of recent international developments, it has been confirmed once again that a permanent establishment can still arise despite the fact that the minimum duration for a permanent establishment is not exceeded, if there is a fiscally inspired splitting up of projects/contracts between group companies.

3. Personal permanent establishment

If your company in Belgium has a (dependent) representative, who does or does not have the authority to conclude contracts on behalf of the company and habitually acts on this authority, this forms a Belgian permanent establishment and a non-resident tax return has to be filed.

Note that the term representative refers to a sales representative for example; it does not refer to a VAT fiscal representative. The term “sales representative” shall thus be understood to mean any person who identifies themselves as a representative of a company and speaks and/or contracts in the name of and on behalf of that company.


In the context of recent international fiscal developments, the representative can also create a permanent establishment even if he is not authorised to conclude contracts, but does have an important role in the negotiating and/or concluding of contracts, where there are no subsequent material contractual changes made by the foreign head office afterwards. In other words, the economic reality will be decisive.

Based on the exact facts and the applicable double tax treaty, if desired, we can check if there is an actual (future) risk that the representative(s) may give rise to a taxable permanent establishment in Belgium.

© Van Havermaet International 2024

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