Permanent establishment: the risk for non-EU freelancers, not only IT services firms

A French client asks you for a “signable” invoice, but your tax residence is in Dubai, Bali or elsewhere outside the EU: the question of permanent establishment quickly arises.

For a French IT services firm, working with a non-EU freelancer can trigger several internal alerts: international taxation, supplier compliance, VAT, due diligence, proof of genuine residence, and the risk of reclassifying the flow.

For you, the risk is different. It is not just about “being able to invoice”. You need to avoid a poorly structured economic presence in France being interpreted as taxable activity in France.

This article explains what a permanent establishment is, why the issue concerns non-EU freelancers, and how to structure a clearer B2B relationship with a French IT services firm.

This article is general information. It does not constitute personalised legal or tax advice. Every situation must be analysed with a competent adviser, particularly in light of your country of tax residence, the applicable tax treaty and your actual performance arrangements.

Permanent establishment: a simple definition

A permanent establishment is an economic presence in a country that is sufficiently characterised for that country to tax part of the profits of a foreign business.

In international taxation, the concept is used to answer one question: does an activity carried out by a non-resident individual or business create a local taxable presence?

For a non-EU freelancer who works with French clients, the issue is therefore clear: can France consider that part of your activity is carried out from France, or through an organised presence in France?

The answer depends on the facts.

It does not depend solely on the address shown on an invoice, nor on the country where your company is registered.

Why the issue concerns non-EU freelancers

A tech freelancer based outside the EU can be perfectly legitimate if three reality-based conditions are met:

• a genuine tax residence outside France;
• an activity actually carried out remotely from abroad;
• no organised presence in France enabling the activity to be operated there.

This is the healthy configuration.

Conversely, the risk increases if the foreign structure is a shell entity that exists only on paper, if the freelancer is in fact working from France, or if a person in France acts as a permanent commercial relay to conclude business on the freelancer’s behalf.

In this second configuration, the issue is no longer an administrative friction. It can become a tax risk.

Key takeaway
Declared tax residence is not enough. Authorities look at reality: place of life, place of actual work, centre of interests, length of presence, commercial organisation, signature of contracts, and operational autonomy.

Tax residence: the starting point

Before discussing permanent establishment, tax residence must be clarified.

A non-EU freelancer must be able to demonstrate that their tax residence is genuine. The 183-day test is often mentioned, but it is not the only one. Tax treaties and domestic laws also take into account the home, the centre of economic interests, personal ties and the actual activity.

Tax residence in Dubai, Bali or another country may be coherent if it corresponds to lived reality.

It becomes problematic if it is used solely to dress up an activity carried out in France.

StelarWork does not sell tax optimisation. Being subject to low or no taxation in a country depends on the freelancer’s pre-existing tax status, their genuine residence and the applicable law. StelarWork intervenes to remove an administrative friction in the relationship with a French IT services firm, not to create tax exemption.

What can create a permanent establishment risk in France

Permanent establishment risk does not arise automatically because a client is French.

A non-EU freelancer can work for a French IT services firm without having a permanent establishment in France, if performance is genuinely carried out from abroad and if the relationship is properly structured.

The risk increases in certain situations.

A physical set-up in France

If you have offices, a permanent workstation, a team or an operational base in France, the authorities may examine whether that presence constitutes a fixed place of business.

An occasional trip does not have the same significance as a habitual and organised presence.

Regularity, duration, the resources made available and the role played in France are decisive.

A regular personal presence in France

Working a few days on site at a client’s premises does not carry the same level of risk as performing the assignment from France for a long period.

“Remote” must be real.

If you are presented as based outside the EU but you perform the service from Paris, Lyon or Nantes, the tax coherence becomes fragile.

A dependent agent in France

Another risk concerns the person or entity acting in France on your behalf.

If a French intermediary habitually concludes contracts in the name of the foreign freelancer, or legally commits that freelancer to French clients, this may give rise to a permanent establishment risk through a dependent agent.

This is an essential point.

A compliant model must avoid a French actor being presented as your representative in France or as a person who signs for you.

A foreign structure with no substance

A company registered outside the EU is not sufficient if it has no reality.

If the foreign entity has no substance, no local effective management, no real activity from its country, and is used solely to invoice French activity, the tax risk increases significantly.

This is the abusive configuration to avoid.

Healthy configuration vs abusive configuration

The distinction is central.

Healthy configuration

A non-EU freelancer can work properly with a French IT services firm when:

• they genuinely live in their country of residence;
• they actually carry out their activity there;
• they have a locally coherent status or structure;
• they do not habitually work from France;
• they do not have a fixed base of activity in France;
• no one concludes contracts in France in their name;
• the contractual relationship is organised as a B2B service, with deliverables, scope and responsibility.

In this case, the main issue for the IT services firm is often supplier compliance: converting a foreign service provider that is difficult to onboard into a clearer French supplier.

Abusive configuration

The risk becomes high when:

• the non-EU residence is fictitious;
• the foreign company is a shell entity;
• the activity is performed mainly from France;
• a French intermediary acts as the freelancer’s permanent representative;
• the contract conceals staff secondment;
• the deliverables, autonomy and service responsibility are not documented.

This configuration is not optimisation. It exposes the parties to reassessments and reclassification risks.

Point requiring attention
The right question is not: “Where is the structure registered?”
The right question is: “Where is the activity actually carried out, by whom, with what resources, and under what contractual responsibility?”

Why French IT services firms often block non-EU freelancers

Even when your situation is healthy, an IT services firm may refuse to contract with you directly.

This refusal is not necessarily linked to your skills.

It often comes from its internal process:

• non-EU supplier not listed;
• no intra-Community VAT number;
• complex management of international invoices;
• VAT reverse charge rules to be checked depending on the flow;
• supplier KYC checks;
• risk of documentary non-compliance;
• difficulty obtaining purchasing approval;
• requirement for a contractually responsible French supplier.

The IT services firm sells a service to its end client. It must secure its contractual chain.

A non-EU freelancer, even an excellent one, may therefore be considered “non-signable” by the IT services firm.

StelarWork’s role in the contractual chain

StelarWork sits within the contract between the French IT services firm and the tech freelancer based outside the EU.

In practical terms, StelarWork contracts in its own name with the IT services firm, then enters into a back-to-back contract with the freelancer for performance of the service.

The IT services firm receives an invoice from a French supplier.

The freelancer is paid by StelarWork according to the contractual terms provided.

StelarWork carries the administrative compliance of the set-up, supplier documentation, contractual coherence and flow monitoring.

This model aims to turn a non-EU freelancer who is difficult to sign into a French supplier that is clearer for the IT services firm.

StelarWork does not act as the freelancer’s representative in France. StelarWork does not conclude contracts in the freelancer’s name. StelarWork contracts in its own name.

This is an important distinction to avoid creating a dependent-agent interpretation.

What StelarWork does not do

StelarWork is not an umbrella employment arrangement.

There is no employment contract, no salary, and no employer-employee relationship.

StelarWork is not a domiciliation service.

StelarWork does not provide an address to give a foreign structure a French appearance.

StelarWork is not an EOR.

StelarWork does not employ the freelancer in order to make them available to a client.

StelarWork is not a legal or tax firm.

StelarWork does not replace the analysis of a tax lawyer or local expert regarding your tax residence.

StelarWork is not a business introducer.

Its role is not to find you an assignment, but to make a relationship already identified with a French IT services firm contractually workable.

Outcome-based service, not staff secondment

The compliance of the model also depends on the nature of the service.

A healthy relationship must be structured as a B2B service.

This implies:

• a defined assignment scope;
• expected deliverables or results;
• autonomy in performance;
• documented responsibilities;
• a clear purchase order;
• a coherent contractual chain between the IT services firm, StelarWork and the freelancer.

Vocabulary matters.

This is not about “placing” a person with a client.

It is not staff secondment.

It is a service performed by a supplier, with a contractual framework and commitments.

This approach aims to reduce the risks of confusion with sensitive arrangements such as unlawful labour lending or unlawful labour supply.

Permanent establishment: what the model can clarify

The StelarWork model does not remove the tax rules applicable to the freelancer.

If you are a genuine tax resident outside the EU, you must remain coherent with that reality: actually live and work outside France, retain local substance, and avoid an organised presence in France.

What the model can clarify is the relationship with the French IT services firm.

The IT services firm does not have to onboard a non-EU supplier directly into its purchasing system.

It contracts with a French company (SASU), which assumes its own contractual responsibility.

The freelancer does not need to artificially create a presence in France in order to be administratively “acceptable”.

This is precisely what reduces the temptation to use poor arrangements: façade domiciliation, shell company, ambiguous local representative, incoherent invoicing.

Key takeaway
StelarWork does not create your non-EU tax residence.
StelarWork does not create a tax advantage.
StelarWork makes the contractual relationship between a French IT services firm and an already legitimate non-EU freelancer simpler and more compliant.

Documents to prepare as a non-EU freelancer

An IT services firm or a compliant intermediary will often ask for basic documents.

Depending on the case, these may include:

• proof of identity;
• evidence of registration or professional status;
• professional bank details;
• certificate or evidence of tax residence;
• description of the activity carried out;
• confirmation of the actual place of performance;
• professional liability insurance if required;
• KYC compliance items.

These documents are not a decorative formality.

They serve to demonstrate that you are a real service provider, that your activity exists and that the contractual flow is documented.

Mistakes to avoid

Some practices create more risks than they solve.

Creating a non-EU company with no substance

An empty foreign company, with no real local activity, does not provide security.

On the contrary, it may reinforce the idea of an artificial arrangement.

Working from France while declaring that you are remote outside the EU

This is one of the most sensitive inconsistencies.

If actual performance is in France, the displayed non-EU residence loses credibility.

Letting a third party sign or negotiate in your name in France

A French relay that habitually acts to commit your activity can create a tax risk.

The model must avoid this confusion.

Accepting a pure time-based arrangement with no deliverables

A B2B service must retain autonomy and a clear scope.

The more the relationship resembles hierarchical integration into the client’s teams, the more the reclassification risks increase.

Presenting the set-up as a tax solution

This is not the right angle.

Compliance rests on the reality of your situation, not on a promise of tax reduction.

Anonymised example: healthy assignment with a French IT services firm

A senior developer genuinely lives outside the EU. They have professional status there and perform their assignments from their country of residence.

A French IT services firm wants to bring them into a client project, but its purchasing department refuses a direct non-EU supplier. The issue is not technical. It is administrative and contractual.

StelarWork can intervene as the French supplier to the IT services firm.

The relationship is structured around a service, with a scope, deliverables, a purchase order and a back-to-back contract with the freelancer.

The freelancer does not create a presence in France.

StelarWork does not sign in the freelancer’s name.

The IT services firm has a contractually responsible French supplier.

The situation remains coherent if actual performance remains outside France and if the freelancer’s tax residence is effective.

Anonymised example: risk configuration

A consultant claims to be based outside the EU, but spends most of their time in France. They work from the end client’s premises, use internal tools like a permanent team member, and have no real activity in the country where their company is registered.

In this case, the foreign address is not enough.

Economic reality may reveal French activity.

The risk does not come only from the contract. It comes from operational behaviour.

StelarWork is not intended to dress up a fictitious situation. The model is designed for freelancers genuinely established outside the EU, with coherent and documented performance.

How to assess permanent establishment risk in practice

To assess your level of risk, ask the right questions:

• Where do you genuinely live?
• Where do you actually work?
• Where is your activity organised?
• Do you have a fixed presence in France?
• Does a person in France commit your activity in your name?
• Does your foreign company have real substance?
• Is the service documented through deliverables and a scope?
• Does the relationship look like a B2B service or like staff integration?
• Do the contracts reflect operational reality?

These questions do not replace a professional analysis.

They do, however, help identify inconsistencies before they become risks.

FAQ

Does a non-EU freelancer automatically create a permanent establishment in France if they invoice a French IT services firm?

No. The mere fact of having a French client does not automatically create a permanent establishment in France.

The risk depends on reality: place of performance, presence in France, commercial organisation, substance of the activity, the role of any intermediaries and the applicable tax treaty.

Can I be a tax resident in Dubai or Bali and work for French clients?

Yes, if your tax residence is genuine and if your activity is actually carried out from abroad.

You must be able to demonstrate the coherence of your situation: place of life, actual presence, centre of interests, local status, and genuinely remote performance.

A façade residence used to conceal French activity is a risk configuration.

Does StelarWork allow me to pay less tax?

No. StelarWork does not sell tax optimisation.

If a freelancer is already a genuine tax resident in a low-tax or zero-tax country, that situation pre-exists StelarWork. StelarWork’s role is to remove administrative and contractual friction with the French IT services firm, not to create a tax advantage.

Does StelarWork act as the freelancer’s representative in France?

No. StelarWork does not sign in the freelancer’s name and does not present itself as their representative in France.

StelarWork contracts in its own name with the IT services firm, then organises a back-to-back relationship with the freelancer for performance of the service.

This distinction is important to avoid a dependent-agent interpretation.

Is StelarWork an umbrella employment solution?

No.

StelarWork does not employ the freelancer, does not pay a salary and does not create an employment contract.

The relationship remains a B2B service relationship.

Does StelarWork remove all tax risk?

No. No serious set-up can promise zero risk.

StelarWork is designed to structure the contractual relationship between a French IT services firm and a non-EU freelancer more cleanly. The freelancer’s personal tax situation must remain genuine, coherent and documented.

What should a non-EU freelancer check before working with a French IT services firm?

They should check the coherence of their tax residence, their actual place of performance, the substance of their activity, the documentation of their professional status, and the contractual nature of the service.

It is recommended to seek competent tax or legal advice for any personalised analysis.

Conclusion

Permanent establishment is not a technical detail. For a non-EU freelancer, it is where international taxation, tax residence, actual performance and contractual compliance meet.

A healthy situation rests on a simple reality: you genuinely live and work outside France, with no organised presence in France, no shell company, and no local representative committing your activity in your name.

In this framework, the blockage often comes from the French IT services firm, which cannot or does not want to contract directly with a non-EU supplier.

StelarWork addresses this friction by becoming the French supplier to the IT services firm, while contracting back-to-back with the freelancer. The model aims to make the relationship clearer, more documented and more compliant, without transforming your tax status or creating an artificial presence in France.