*Model Tax Conventions Series*
*KP 5 (11-07-2020)*
# *Chapter II: Definitions –Permanent Establishment*
*Meaning of PE [Article 5(1)]*
- There should be an *enterprise*
- Such enterprise should be carrying on a “business”;
- There should be a “place of business (POB)”
- Such POB should be at the *disposal of the enterprise* (may be owned/rented but must be one which the enterprise has the effective power to use);
- The POB should be *fixed*, i.e. it must be established at a distinct place with a certain *degree of performance*
- The business of the enterprise is carried on wholly or partially through this fixed POB
*A PE does not exist unless all the aforesaid conditions are satisfied.*
*Specific inclusions in the meaning of PE [Article 5(2)]
- A branch
- A place of management
- An office
- A Factory
- A workshop
- A mine, oil/gas well, quarry etc.
*Expansion of scope of Agency PE*
- Agency PE targets activities done by a dependent agent (DA) of the enterprises in the Source State (SS)
- DAPE now includes when an agent habitually concludes contracts or habitually plays the principal role leading to the conclusion of contracts routinely concluded without material modification by the enterprise.
*PE of an Insurance Enterprise*
UN MC
-UN MC has an additional Article 5(6) relating to insurance. An insurance Enterprise of a CS is deemed to have a PE in the other CS if it collects premiums in the territory of that other CS or insures risks situated therein through a person
OECD MC
In the absence of similar Article in the OECD MC, a PE of an insurance Enterprise is to be determined in accord with Article 5(1) or 5(2)
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