Preventing the Artificial Avoidance of PE Status
On 5 October 2015, ahead of the G20 Finance Ministers’ meeting on 8 October, the OECD Secretariat published thirteen papers and an Explanatory Statement outlining consensus Actions under the Base Erosion and Profit Shifting (‘BEPS’) Project. These papers include and consolidate the first seven reports presented to and welcomed by the G20 Leaders at the Brisbane Summit in 2014. The output under each of the BEPS Actions are intended to form a comprehensive and cohesive approach to the international tax framework, including domestic law recommendations and international principles under the OECD Model Tax Treaty and transfer pricing guidelines.
As part of the 2015 output, the OECD Secretariat issued a final report in relation to preventing the artificial avoidance of permanent establishment status (Action 7), which introduces changes to the OECD Model Treaty and the Commentary. The report builds on proposals put forward in the G20/OECD’s discussion drafts from October 2014 and May 2015 and updates the definition of permanent establishment in Article 5 of the OECD Model Treaty.
This Action is of particular interest in Australia at present in light of the Government’s intention to legislate the Multinational anti-avoidance law (MAAL) from 1 January 2016.