A subsidiary on its own does not constitute a permanent establishment. The fact that a company is under a common control or controlled by another person does not constitute a permanent establishment. A subsidiary is legally separate from their parents. This means tax and debt are paid by the individual organization. Subsidiary companies will be aligned with the local regulations or laws. A subsidiary can be considered as a permanent establishment when it tries to act like an independent agent by acting exclusively on behalf of the principal (Section 107 of Income Tax ACT 896 for Taxation of Permanent Establishment).