New proposals on permanent establishments
The OECD Base Erosion and Profit Shifting (BEPS) action plan has now issued its final draft on the artificial avoidance of Permanent Establishment (PE) status. The draft sets out a range of specific proposed changes to the PE definition in the OECD model treaty. These could have far reaching consequences.
One of the main areas is the proposed changes to the definition of ‘dependent agent’ where:-
- the test of ‘concluding contracts’ is replaced with ‘concluding contracts or negotiating the material elements of contracts’;
- the test that the contracts be ‘in the name of the enterprise’ is replaced with a test as to whether the contracts are for the transfer of property owned or for the provision of services by the enterprise; and
- the exception for independent agents acting in the ordinary course of business will exclude companies that act exclusively (or almost exclusively) for connected companies.
There are also two major changes to the ‘specific activity’ exemption:
- the activities must pass the test of being ‘preparatory or auxiliary;’ and
- an anti-fragmentation rule is to be introduced.
A lot of businesses may be affected by this if the plan became final.
Date: 18th June, 2015
Articles from this Author
20th July, 2017
Uncertain times for winding up transactions
3rd July, 2017
9th June, 2017
27th April, 2017
Government places Making Tax Digital legislation on hold
Contact Business Service Partners
Choose from the drop down menu below to select a Partner to contact.
For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole