*International taxation* *Model Tax Conventions Series* *KP 5 (11-07-2020)* Permanent Establishment

*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)

Series continue……

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