Friday, 22 May 2015

OECD releases revised discussion draft on definition of permanent establishment

On 15 May 2015, the OECD, as part of the action plan to address base erosion and profit shifting (BEPS), released a revised discussion draft on action 7. Action 7 is focused on updating the definition of taxable presence (i.e. a permanent establishment or PE) in article 5 of the OECD model tax treaty to prevent abuse of the threshold for allocating taxing rights on trading activities to different jurisdictions, in particular, through the use of commissionnaire arrangements and benefits from specific activity exemptions. The OECD also is considering the modernization of the PE threshold in relation to digital cross-border business, in line with the work on the digital economy (Action 1).
The discussion draft selects proposals, and in some cases refines them, from the alternatives put forward in the discussion draft issued on 31 October 2014 (for prior coverage, see OECD Tax Alert, 4 November 2014). The revised draft analyzes the comments received, debates the choices made by the Working Group and sets out proposed amendments to article 5 of the model treaty and its associated commentary.
As with other discussion drafts on BEPS actions, the proposals do not represent a consensus view from the G20/OECD governments involved, but are designed to provide substantive proposals for public analysis and comment.
Source & more info: Deloitte