Dependent Agents as Permanent Establishments (eBook)

Schriftenreihe IStR Band 85 (Ausgabe Österreich)

Michael Lang, Josef Schuch, Claus Staringer, Pasquale Pistone, Alfred Storck (Herausgeber)

eBook Download: PDF

2014 | 1. Auflage
312 Seiten
Linde Verlag Wien Gesellschaft m.b.H.
978-3-7094-0542-0 (ISBN)

Infos

Dependent Agents as Permanent Establishments

The article on business profits may be the most relevant one in tax treaties. If patterned after the OECD Model Tax Convention, this article allocates the exclusive taxing right over the profits of an enterprise to the residence country, unless the enterprise carries on business in the source country through a permanent establishment. Considering the importance of allocating taxation rights, tax authorities and courts of many countries have increasingly focused on the concept of agency permanent establishment. This book includes 12 chapters which provide an in-depth analysis of the key aspects that need to be taken into account for interpreting the concept of agency permanent establishment. It incorporates the perspectives of leading scholars and practitioners dealing with international tax cases. This book is designed to provide essential insights to academics, practitioners, tax officials and judges who deal or are interested in the field of international taxation.

Inhalt

Titelei 
3 
Preface 5
Content 7
List of Authors 9
John F. Avery Jones: 
12 
Philip Baker QC: Dependent Agent Permanent Establishments: Recent OECD Trends 33
Raffaele Petruzzi: 
43 
Alfred Storck/Sabine Schmidjell-Dommes: Acting on Behalf of an Enterprise under 
56 
Katharina Daxkobler: Authority to Conclude Contracts in the Name 
93 
Pasquale Pistone/César Alejandro Ruiz Jiménez: 
139 
Daniel Fuentes Hernández: Agents of an Independent Character under Article 5(6) of the OECD Model Convention 167
Claus Staringer/Felipe Vallada: 
191 
Nadine Oberbauer: 
213 
Harald Moshammer/Michael Tumpel: 
239 
Kasper Dziurdz: 
255 
Josef Schuch/Eline Huisman: The Dependent Agent PE under Article 5(5), 
279 

Textauszug

Dependent Agent Permanent Establishments: Recent OECD Trends

Philip Baker QC

I. Introduction

II. Background Comments on DAPEs

III. The OECD 2012 Revised Proposals on the Interpretation and Application of the Permanent Establishment Concept

IV. Commissionaire Structures and Recent Cases

V. Consequences of Being Deemed to Have a DAPE

VI. The Acceptance of New Article 7

VII. Concluding Remarks and the BEPS Project

Seite 23

I. Introduction

This brief chapter examines three recent developments related to the definition of a dependent agent permanent establishment (DAPE) in article 5 of the OECD Model Tax Convention on Income and Capital (the OECD Model), namely the revised proposals concerning the interpretation and application of article 5, which were published by the OECD in October 2012, as they relate to DAPEs;72 the recent series of cases on commissionaire structures;73 and the international acceptance of the new version of article 7 of the OECD Model which was adopted in 2010. To a certain degree, each of these three recent developments has become entwined with the current project of the OECD on base erosion and profit shifting (BEPS), and in the concluding remarks of this chapter, some additional material will be included with regard to that project.

II. Background Comments on DAPEs

By way of background to these three developments, it may be appropriate to offer a few general words about DAPEs. The underlying concept is that an enterprise that is resident in one contracting state may become taxable on its business profits in another (host) state even if it has no fixed place of business (falling within article 5(1) of the OECD Model) in the host state. The alternative requirement is that it be represented in the host state to a sufficient degree that the representative becomes a dependent agent. Implicit in this concept is the idea that mere representation (by a representative office, for example) in the host state, of itself, is not enough. There must be representation to a sufficient degree to fulfil the conditions in article 5(5)74 and the representative must not come within either the exemption for “independent agents” in article 5(6)75 or merely carrying out activities which, if exercised through a fixed place of business, would be exempt under article 5(4).76 The 19th century origins of the permanent establishment concept would identify this type of representative with a travelling salesman or local representative of a foreign manufacturing firm who solicited and concluded orders from customers of the firm in the host state.

72

The proposals are set out in “OECD Model Tax Convention: Revised Proposals Concerning the Interpretation and Application of Article 5 (Permanent Establishment)”, released for consultation by the OECD on 19 October 2012. The closing date for the consultation period was 31 January 2013. Subsequently, no further steps have been taken publicly by the OECD in terms of implementing any of these proposals.

73

The French legal concept of a commissionaire has two n’s, but the English spelling has one only. Hopefully, spellchecking will allow the correct version to prevail.

74

Specifically, the representative must be “acting on behalf of an enterprise and has, and habitually exercises, in [the host state] an authority to conclude contracts in the name of the enterprise [...]”.

75

So that the representative is not “a broker, general commission agent or any other agent of an independent status [...] acting in the ordinary course of their business”.

76

If, for example, the representative were merely storing, displaying or delivering goods, or carrying out other activities of a preparatory or auxiliary character.

Seite 24

It may be helpful to identify three types of representatives who may constitute DAPEs. First, what one might refer to as an “internal agent”, that is someone engaged within the non-resident enterprise to represent the enterprise in the host state. The most common example of this would be an employee of the enterprise who is sent to the host state with authority to conclude contracts with customers there; directors of a non-resident company who are sent to the host state, again with authorization to conclude contracts; or, for example, partners of a non-resident partnership who may have, under the law governing that partnership, an implied authority to conclude contracts binding on the partnership or all the partners. One suspects that this is probably the most common type of DAPE and that, on a regular basis, enterprises of one state send persons engaged by that enterprise to the host state with authority to conclude contracts, which authority is then habitually exercised in the host state. Clearly, this is the paradigm, 19th century example of the travelling salesman employed by the foreign company, or the locally-based employee acting as a representative of the foreign company.

The second category are representatives who are “external and unassociated” – that is representatives who are not engaged within the non-resident enterprise, but belong to a separate enterprise which is not associated (in the sense of not being in any way under common control) with the foreign enterprise. This would cover, for example, an unassociated foreign company that is engaged to act as local agent, distributor or dealer for the foreign enterprise; it would also include self-employed persons based in or operating in the host state who were engaged by contract to represent the foreign enterprise and had authority to conclude contracts binding on the foreign enterprise.77 Commonly, such external and unassociated representatives will be agents of independent status within the exemption under article 5(6). However, if they are not of independent status – because, for example, they are economically dependent upon the foreign enterprise – then they would constitute a DAPE. The 19th century might have seen this in the form of the independent salesman who represented a business in his home state, or a local enterprise which – perhaps alongside its own business – also took orders for a foreign company.

Thirdly and finally, the representative may be “external but associated” – that is the representative is a separate enterprise, separate from the foreign enterprise that is being represented, but is an associated enterprise in the sense of being under common control. The most common example of this would be a sister company in the same multinational group as the foreign enterprise, where that sister company represents the foreign enterprise and habitually exercises authority to

77

A good example of this would be the self-employed insurance agents in the Knights of Columbus case (CA: Tax Court of Canada, Ottawa, 2008, , 10 Intl. Tax Law Rep. 827 (2008)) or the case, (CA: Tax Court of Canada, 2008, , 11 Intl. Tax Law Rep. 52 (2008)), except that in those cases the self-employed insurance agents had no authority to conclude contracts binding upon the US insurance company they represented.

Seite 25

conclude contracts binding upon78 the foreign enterprise.79 This would cover the increasingly common situation where associated companies of the same multinational group represent other members of the group in their host state, but give rise to a permanent establishment only if either the premises of the company are at the disposal of staff of their foreign sister enterprises or if they have and habitually exercise authority to conclude contracts binding upon their foreign, sister enterprise and are not acting as agents of independent status.80

One may quite properly ask what is the point of distinguishing these...

Produkt-Details

• Erscheint lt. Verlag: 4.7.2014
• Sprache: englisch
• Themenwelt: Recht / Steuern ► Steuern / Steuerrecht
• ISBN-10: 3-7094-0542-4 / 3709405424
• ISBN-13: 978-3-7094-0542-0 / 9783709405420