BEPS Action 7: OECD Releases Revised Discussion Draft on Definition of Permanent Establishment

Tax Analysis:July 14, 2015/China

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. (Tax Analysis:July 14, 2015/China)

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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 commissionaire 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).

This newsletter explains following topics;

(1) Proposals for amendments to article 5
(2) Profit attribution to PEs and interaction with action points on transfer pricing
(3) Deloitte Comments and business next steps

>> Click for Japanese [BEPS行動計画7 : OECDが恒久的施設(PE)の定義に関するディスカッションドラフトの改訂版を公表]

(158KB, PDF)

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