A wake-up call for companies with commissionaire and similar structures

Following discussion draft titled BEPS Action 7: Additional Guidance on the Attribution of Profits to Permanent Establishments, amendments to the OECD Model Convention (“OECD MTC”) have been announced that will impact the attribution of profits to permanent establishments (“PEs”) with respect to warehouses as fixed place of business. Accordingly, amendments have been announced that will impact the status of dependent agents, including those created through commissionaire and similar arrangements. This is currently clarified in Article 5(5) of the OECD MTC.


31 Jan. '17
Patrick T.F. Schrievers

Impact BEPS Action 7

In the discussion draft, the attribution of profits to a dependent agent PE is illustrated in four examples all involving a fact pattern in which a non-resident enterprise, acting as a principal, engages an associated enterprise resident in the host jurisdiction or sends an employee to the host jurisdiction to perform activities that give rise to a dependent agent PE under Article 5(5) of the OECD MTC. A dependent agent PE is therefore created by the activities of either an associated enterprise or otherwise by an employee of the non-resident enterprise. The key question in the assessment of the existence of a dependent agent PE is whether or not the dependent agent performs any significant people functions on behalf of the non-resident enterprise.

The BEPS Focus Group on the Artificial Avoidance of PE Status intends to tackle legal structures that do not align to economic reality. In case law published in 2010 and 2011 (the cases Zimmer and Dell), local Courts in France and Norway confirmed that commissionaire arrangement should be excluded from the deemed PE in article 5(5) OECD MTC. However, as a consequence of international pressure, these arrangement were categorized as artificial and widely considered as being put in place primarily in order to erode the taxable base of the State where the sales take place. This ultimately has led to BEPS Action 7 and the proposed amendments in the OECD MTC.


Patrick T.F. Schrievers

Patrick T.F. Schrievers is a tax lawyer and member of the Dutch Association of Tax Advisers (NOB) and the International Fiscal Association (IFA).

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