Article 4 - Permanent Establishments in the Kingdom

Without prejudice to the definition of Permanent Establishment included in Article 1 of the Law and the provisions of Article 6 of these Regulations, a Non-Resident Entity has a Permanent Establishment in the Kingdom as described in Paragraph D of Article 5 of the Law in any of the following situations:

1. If it has a fixed or permanent place in the Kingdom through which the business of the Non-Resident Entity, or part of it, is conducted.

2. Where a person, other than an agent of an independent status to whom Paragraph F of this Article applies, has and habitually exercises an authority to conduct business in the Kingdom on behalf of the Non-Resident Entity.

3. If it has any other form of nexus in the Kingdom as determined by a decision issued by the Minister.

For the purposes of applying Clause 1 of Paragraph A of this Article, a fixed or a permanent place in the Kingdom includes:

1. A place of management.

2. A branch.

3. An office.

4. A factory.

5. A workshop.

6. A mine, an oil or gas well, a quarry or any other site for the extraction or exploration of natural resources including, but not limited to, vessels and structures used for the extraction of such natural resources.

7. Building and construction site, assembly, and installation project, but only where such site or project or activity continues for more than 12 months.

Notwithstanding Clause 1 of Paragraph A and Paragraph B of this Article, a fixed or permanent place in the Kingdom shall not be considered a Permanent Establishment of a Non-Resident Entity in the Kingdom if it is used solely for any of the following purposes:

1. The use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the Non-Resident Entity.

2. The maintenance of a stock of goods or merchandise belonging to the Non-Resident Entity solely for the purposes of storage, display or delivery.

3. The maintenance of a stock of goods or merchandise belonging to the Non-Resident Entity for the purpose of processing by another person.

4. The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information for the Non-Resident Entity.

5. The maintenance of a fixed place of business solely for the purpose of carrying on, for the Non-Resident Entity, any other activity.

6. The maintenance of a fixed place of business solely for any combination of activities mentioned in Clauses 1 to 5 of this Paragraph.

   Provided that the activity is of a preparatory or auxiliary nature, or in the case mentioned in Clause 6 of this Paragraph, that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

Paragraph C of this Article shall not apply to a fixed or permanent place of business that is used or maintained by a Non-Resident Entity if that Non-Resident Entity or a related person carries on business activities at the same place or at another place in the Kingdom and any of the following applies:

1. That place or other place constitutes a Permanent Establishment for the Non-Resident Entity or the related person under the provisions of this Article.

2. The overall activity resulting from the combination of the activities carried out by the Non-Resident Entity and the related person at the same place or at the two places is not of a preparatory or auxiliary nature and together would form a cohesive business operation, had the activities not been fragmented.

For the purposes of Clause 2 of Paragraph A of this Article, a person shall be considered as having and habitually exercising an authority to conduct business in the Kingdom on behalf of a Non-Resident Entity in any of the following situations:

1. The person habitually concludes contracts on behalf of the Non-Resident Entity.

2. The person habitually negotiates contracts that are concluded by the Non-Resident Entity without the need for material modification by the Non-Resident Entity.

Notwithstanding Clause 2 of Paragraph A and Paragraph E of this Article, a Non-Resident Entity shall not have a Permanent Establishment in the Kingdom where a person conducts business in the Kingdom as an independent agent and acts for the Non-Resident Entity in the ordinary course of that business, or conducts activities limited to those mentioned in Paragraph C of this Article which through a fixed or permanent place of business, unless any of the following situations occur:

1. The person acts exclusively or almost exclusively on behalf of the Non-Resident Person.

2. The person cannot be considered legally or economically independent from the Non-Resident Person.

3. The person conducts activities through a fixed or permanent place of business for which Paragraph D of this Article applies.

For the purposes of applying the provisions of this Article, a Non-Resident Entity is an Entity which does not fulfil the criteria stipulated in Paragraph E of Article 5 of the Law.

For the purposes of this Article, a person is related to another person if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same persons.

Financial Accounting Net Income or Loss shall be allocated to a Permanent Establishment in the Kingdom in accordance with Article 10 of these Regulations.