Should webshops and MNEs that are using commissionaire and similar strategies worry about their tax position?

Following questions received from clients we have decided to provide some more information regarding the Action 7 anti-BEPS measures in relation to agency and commissionaire structures, auxiliary PEs (for instance warehousing) and limited risk distributors.


31 Jan. '17
Gert-Jan Hop

Action 7 aims to tackle tax avoidance strategies used to circumvent the PE-definition. This relates to the use of agency or commissionaire arrangements and the exploitation of the existing exceptions to the PE definition, in particular those relating to activities of a “preparatory and auxiliary” nature. Action 7 also proposes to amend the rules on independent agents to prevent the use of exclusive or almost exclusive (i.e. representing more than 90% of the sales conducted) agents, who factually may be dependent. Following the publication of the Action 7 report the PE definition has been revised. In the subsequent two blogs we will clarify the consequences for:

A. MNEs that are benefiting from the preparatory or auxiliary exemption of article 5(4) OECD Model Tax Convention; and B. MNEs that are using commissionaire and similar strategies.

Preparatory an auxiliary exemption of article 5(4) OECD Model Tax Convention

In this blog we will focus on item A which is currently clarified in Article 5(4) of the OECD Model Tax Convention (“MTC”). This provision is widely applied in Double Taxation Avoidance Agreements (“DTAAs”) and lists a number of auxiliary and supplementary activities, such as warehousing and storage, which despite entailing the existence of a fixed place of business under article 5(1) OECD MTC, do not qualify as PE activities. If cross-border activities are considered a PE under article 5(1), article 5(4) automatically applies if one of the activities listed in article 5(4)(a)-(d) is the only activity carried out. Unfortunately the article 5(4)(a)-(d) does not explicitly mention that the activities carried out at these premises must be of a preparatory or auxiliary nature. It only explains a number of activities that are typically considered to be preparatory or auxiliary by nature such as for instance the use of storage facilities or delivery of goods or merchandise. This enabled large internet companies such as Amazon to prevent PE taxation in countries where warehouses were located by means of article 5(4)(a).


Gert-Jan Hop

Gert-Jan Hop is a tax lawyer with over twelve years of experience gained in the field of tax advise for larger multinational companies and high net worth individuals.

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