Does engaging people in India create a permanent establishment for us?
The question a tax department raises once procurement is satisfied — and the one where a vendor telling you not to worry should make you worry.
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So does this structure create a permanent establishment?
Usually not in this structure, but it depends on facts about your company that we are not in a position to assess. You have no premises and no personnel of your own in India: the Indian entity employs, the Dubai entity invoices you, and you buy a service. That is a different arrangement from establishing a presence — but the conclusion is your tax adviser's to reach, not ours.
- You have no office, no branch and no registered presence in India.
- The professionals are employed or contracted by KVC in India, not by you.
- You contract with JoinNow FZCO in Dubai for a service and receive an invoice.
- Permanent establishment analysis turns on your own structure and activities, which is why this page stops short of a conclusion.
What actually drives the risk
Three factors that a tax adviser will look at, and where this structure sits on each.
A fixed place of business
Permanent establishment typically starts with premises at your disposal in the other country [1][2]. You have none: the people work from our partner's setup in Bangalore, not from a place you hold or control.
Authority to bind you
Someone habitually concluding contracts on your behalf in another country is the other classic route [2]. Development and delivery work does not do that — but if you were to give someone commercial authority, that is a change worth flagging to your adviser.
What you actually buy
You buy capacity as a service under a Dubai contract. The employment relationship, the payroll and the statutory obligations sit with the Indian entity, and none of that is carried out in your name.
What this means for your review
What your tax adviser will want, and what changes the picture.
Hand them the structure, not the summary
Give your adviser the actual contracting chain and the engagement documents rather than a description of them. It is a short review when the paperwork is in front of them and a long one when it is not.
Watch for commercial authority
Technical work is one thing; someone negotiating or signing on your behalf is another. If a role drifts in that direction, raise it — the drift is what creates exposure, not the original arrangement.
Treat relocation as a new question
Moving someone to Germany, or establishing your own presence in India, changes the analysis entirely. Neither should be decided as an operational detail.
Get it in writing once
A short written position from your adviser at the start costs very little and answers the same question every time it comes back — at renewal, at audit, or when a new CFO arrives.
What we hand over for the review
- The full contracting chain: which entity contracts with you, which employs in India, and what each is responsible for.
- The engagement documents your adviser needs to form a view, rather than a summary of them.
- A direct conversation with your tax adviser if they want to ask us something rather than infer it.
Follow-up Questions
Does the size of the team change the answer?
It can change how closely the arrangement is looked at, even where the structure is unchanged. A single developer and a twenty-person group are the same setup on paper, but the second is more likely to attract questions — which is a reason to have the written position early rather than at twenty.
What if we visit the Bangalore office?
Visiting is normal and we encourage it. Occupying space there on an ongoing basis, in your own name, is a different matter and is exactly the kind of fact that belongs in front of your adviser before it becomes a habit.
Does the Dubai entity create an issue instead?
It is where your contract sits and where invoicing happens, so it belongs in the analysis alongside India. What we can tell you is what the structure is; whether it creates an exposure for your company depends on your own tax position and treaty situation [3].
Can you just confirm there is no permanent establishment?
No, and you should be sceptical of a supplier who does. We can describe our structure accurately and completely, which is the input your adviser needs. The conclusion depends on facts about your company that we do not have and are not qualified to weigh.
Sources
All sources retrieved and checked against the cited passages on 6 August 2026.
- [1] § 12 Fiscal Code (Abgabenordnung, AO) — statutory definition of permanent establishment. Federal Ministry of Justice, gesetze-im-internet.de — https://www.gesetze-im-internet.de/ao_1977/__12.html § 12 sentence 1 (our translation): “A permanent establishment is any fixed place of business or facility that serves the activity of an enterprise.”
- [2] OECD Model Tax Convention on Income and on Capital, Art. 5 — permanent establishment. Condensed version, as it read on 21 November 2017, OECD (PDF) — https://www.oecd.org/content/dam/oecd/en/publications/reports/2017/12/model-tax-convention-on-income-and-on-capital-condensed-version-2017_g1g8769b/mtc_cond-2017-en.pdf Art. 5(1), p. 31: “a fixed place of business through which the business of an enterprise is wholly or partly carried on”; Art. 5(5), p. 32: agency permanent establishment where a person “habitually concludes contracts” on the enterprise’s behalf.
- [3] Federal Ministry of Finance — circular of 7 January 2026 on the status of Germany's double taxation treaties as of 1 January 2026 — https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Internationales_Steuerrecht/Allgemeine_Informationen/2026-01-07-stand-DBA-1-januar-2026.html Overview of the treaties in force and negotiations pending as of 1 January 2026 (circular of 7 January 2026).
This page describes how our engagements are set up. It is general information, not tax advice, and it deliberately stops short of a conclusion about your company — have your own tax adviser assess your specific situation.
Give your tax adviser something to work with
We will put the whole contracting structure in front of them, in writing, and answer whatever they ask directly.