Permanent Establishment

Question 1

General rule for international business

Answer 1

Business should be conducted by regional Units

Question 2

Definition of a PE

Answer 2

Legally dependent business form of the registered presence of a company in a country of activity. Subject to local law and taxation.

Question 3

Types of a PE

Answer 3

1) Building site/construction/installation PE 2) Dependent agent PE 3) Service PE

Question 4

Building site/construction or installation PE - duration and activities

Answer 4

Duration more than 12 months, construction activities, on-site supervision, installation

Question 5

Dependent agent PE - trigger

Answer 5

If a person is acting on behalf of the company and negotiates contracts on behalf of the company

Question 6

Service PE - duration and activities

Answer 6

More than 183 days (in a 12 months period), consulting activities, software installation, training

Question 7

Classification of PE within Siemens

Answer 7

1) Project PE(single/multi project), 2) Branch, 3) Representative office

Question 8

Project PE

Answer 8

Constituted if the parent entity performs activities associated with an order/project over a certain period of time as direct business

Question 9

Branch

Answer 9

PE defined as branch it it performs key corporate functions such as marketing, order processing, R&D, production or sales on a regular basis. Timeline: Usually longer than 5 years

Question 10

Representative office

Answer 10

Differs from a project PE or branch, maintained in a country exclusively for auxiliary or marketing purposes, no activities associated with an order

Question 11

Consequences of PE

Answer 11

Overall: Tax and cost implications of the legal requirements - infrastructure costs + administrative costs + risk of double taxation
1) Commercial/Tax/law - registration, accounting, tax declaration obligation 2) Labor Law (compliance with local law, taxation of salaries, Social Security) 3) other possible legal consequences (Opening bank account, risk of claims filed against parent company, sanctions for non-compliance with obligations)

Question 12

Project PE approval process

Answer 12

Workflow based through PATAC, approval by CF T PE Governance & CFO

Question 13

Branch PE / Representative office approval process

Answer 13

Form based process, approval by CF T PE Governance & CFO

Question 14

Project PE PATAC - Steps (6)

Answer 14

1) Business Input (on/offshore split)
2) Timeline
3) Tax Feedback
4) PE Input (tax consultant)
5) PE Tax checklist
6) PE approval request

Question 15

On/Offshore Split via FRAA, Checked Topics

Answer 15

Function, Risk and Asset Analysis
1) Function: In which country are the relevant people function performed (e.g. installation)
2) Risks: In which country are project decisions taken and risks borne?
3) Assets: To which country are project assets (bank account, cars) located?
4) Analysis: Country specific regulations

Question 16

Accounting Approaches for a PE - Requirements / When in place?

Answer 16

PE activities are fully compromised of the parent entity, subject to IFRS, local commercial GAAP, local tax regulations
2) At an early stage

Question 17

PE, three basic accounting approaches

Answer 17

1) Reporting solution - requires no local accounting for PE, local reporting purely on IFRS figures
2) PE accounting solution - PE maintains a separate accounting system. Accounting data for PE is extracted from the parent entity accounting, further adapted in the PE accounting system (PE IT Tool)
3) Dependent ARE solution - always in the case of a branch.

Question 18

PE approval - must be in place when?

Answer 18

Before binding offer is placed (PM040)

Question 19

Opening a PE, steps after PM070

Answer 19

1) Order Creation in PATAC
2) Order Creation business input
3) Update Timeline if needed
4) Update tax feedback

Question 20

Responsibility of a PE Manager

Answer 20

Representative of the Lead Unit, overall responsibility to organize and monitor setup, processing and closure in accordance with local law. Examples: Open local bank account, hire PE personnel, perform payments on behalf of PE, sign tax declaration

Question 21

Responsibility of CPMs/Business

Answer 21

Delivering information and data to assure compliance, fulfilling tasks for PE Reporting (e.g. PE IT Tool)

Question 22

Responsibility of CF T

Answer 22

Responsible for all tax related topics concerning the PE, ensures tax compliance

Question 23

Responsibility of PE Local accountant

Answer 23

Supports tax function to comply with local law and taxation.

Question 24

PE, local registrations

Answer 24

1) Corporate income tax registration 2) VAT sales tax registration 3) Personal income tax registration 4) Registration for other local taxes

Question 25

CISS (Corporate Information on Siemens Subsidiaries) Tool

Answer 25

Central database to record Siemens entities. PE needs to be entered (registration documents, PE Manager). PE receives a CISS number

Question 26

Setup of PE reporting

Answer 26

SAP setup must reflect on-and offshore split. CPM assigns SD Orders or WBS elements to split Financials

Question 27

Unintended PE - what to do

Answer 27

Immediately inform tax department via PATAC

Question 28

How does a PE Manager get assigned?

Answer 28

Assignment letter

Question 29

What is the PE Manager Checklist?

Answer 29

Checklist to serve as a guide for PE Manager to fulfill his/her duties

Question 30

PE, Corporate Income Tax

Answer 30

SAP reflects split of project, assures correct taxation of profit attributable to the PE

Question 31

PE, Withholding Tax

Answer 31

1) Credit-side WHT - must be deducted and paid by Siemens to the tax authority, represents tax payment on behalf of supplier 2) Debit side WHT - must be deducted and paid by the customer to the local tax authority. Represents tax payment on behalf of Siemens

Question 32

PE, relevant tax types

Answer 32

1) Corporate income Tax 2) Withholding Tax 3) VAT 4) Personal Income tax

Question 33

PE, Transfer Pricing Documentation

Answer 33

Arms length principle needs to be complied with, based on FRAA. Transfer Price Report needs to be updated on a yearly basis. Consequences: Penalties, ban, damage to Siemens reputation

Question 34

PE, PATAC, warranty

Answer 34

In case the project is in the warranty phase and warranty activities are required, a separate PATAC entry needs to be created

Question 35

When can a PE be closed?

Answer 35

When the purpose of the PE has ceased to exist & all legal and tax obligations have been fulfilled.

Question 36

Liquidation process and local deregistration of a PE

Answer 36

After closure approval has been obtained, recovery of assets, archiving documents, tax audit, closure of bank account

Question 37

PE Closing status in CISS

Answer 37

Closure approved = in liquidation Dormant status approved = dormant Closure rejected due to legal reasons = works completed

Question 38

Double Taxation Treaty

Answer 38

Contract between two countries in which the taxation rights are distributed among the countries