A permanent establishment (PE) is a fixed place of business that generally gives rise to income or value-added tax liability in a particular jurisdiction. The term is defined in many income tax treaties and in most European Union Value Added Tax systems. The tax systems in some civil-law countries impose income taxes and value-added taxes only where an enterprise maintains a PE in the country concerned. Definitions of PEs under tax law or tax treaties may contain specific inclusions or exclusions. History The concept of PE emerged in the German Empire after 1845, culminating with the German Double Taxation Act of 1909. Initially, the objective was to prevent double taxation between Prussian municipalities, and this was extended to the entire German federation. In 1889, the first bilateral tax treaty, including the concept of PE, was concluded between the Austro-Hungarian Empire and Prussia, marking the first time the concept was used in international tax law. After years of preparatory works, in 1928, the League of Nations developed a model to tackle cross-border double taxation and to counter tax evasion. Since then, an extensive network of bilateral tax treaties was gradually established, particularly through the influence of the OECD Model Tax Convention, where this concept persisted. Types In the OECD Model Tax Convention, essentially three types of PEs can be construed: A fixed place of business PE (article 5(1)); A construction or project PE, which is a special subset of the fixed place of business PE, with different requirements (article 5(3)); and An agency PE, through the actions of a dependent agent (article 5(5-6)). The UN Model Tax Convention, which gives greater consideration to developing countries, adds what is known as a service PE in article 5(3)b. Some countries, such as Saudi Arabia, have been trying to extend the concept of service PE into a virtual service PE. Under the Base Erosion and Profit Shifting project being developed by the OECD and endorsed by the G20, a new nexus based on significant digital presence is being considered under Action 1, aimed at Addressing the Tax Challenges of the Digital Economy. Fixed place of business The starting point for determination if a PE exists is generally a fixed place of business. The definition of PE in article 5 of the OECD Model Income Tax Treaty is followed in most income tax treaties. The commentary indicates that a fixed place of business has three