background image
4.1. Domestic PE of a Foreign Entity

A Permanent Establishment ('PE') is defined under the tax laws of Turkmenistan as a fixed place of business through which the business of an enterprise is, wholly or partly, carried on either directly or through an authorized person. A place of business generally includes:

a) a place of management, a branch, bureau, an office, an agency, a factory, a workshop, shop or any other similar place from where business activities are conducted;

b) any place related to the exploration, development and (or) extraction of natural resources (irrespective of the time limit of such activities) including mine, an oil or gas well, a quarry, land or sea towers or wells, offshore drilling platforms and any place of related supervision activities;

c) a construction site, assembly or assembly facilities and related supervisory activities. Effective from September 2016, construction site ceases to be a PE in Turkmenistan, when the exploitation of the construction is commenced (irrespective of the signing of the acceptance act)

d) a warehouse located in Turkmenistan and used for the sale (delivery) of goods;

e) an agent (excluding an independent agent acting in the ordinary course of business) performing any function on behalf of a person in Turkmenistan.

In points b) and c) above, a PE is formed at the earlier date of:

  • Issuance of permit or license of extraction of natural resources or commencement of extraction work; and
  • Signing of a construction contract or commencement of construction work.

Unless otherwise stated in the law, a PE is formed when the period of implementation/commencement of activity exceeds 45 calendar days in total for any 12-month period, regardless of the number of contracts.

However, the following places are not considered as a PE of a foreign enterprise in Turkmenistan:

  • Using facilities for storage, demonstration of goods or products belonging to the enterprise;
  • Using the inventory of goods or merchandise belonging to the enterprise for the sole purpose of being processed by another entity;
  • Using a fixed place of business for the sole purpose of purchasing merchandise for subsequent export, including contracts for their sale to other persons outside Turkmenistan or collecting information for the enterprise;
  • maintenance of a permanent place solely for the purpose of signing contracts on behalf of the enterprise;
  • carrying out any other preparatory or auxiliary activities for the benefit of the enterprise.

Note that pursuant to a tax law amendment of September 2016, a construction site ceases to form a permanent establishment in Turkmenistan from the moment the acquirer starts exploiting the building or construction. Previously, the permanent establishment status ceases only from the moment the property is registered as immovable property.