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Attribution of Participations to Permanent Establishments
Historical Development – Economic Ownership as “Key Driver”
This article is the first of a two-part contribution that takes a detailed look at the attribution of participations to permanent establishments (PEs). It particularly addresses the historical evolvement of profit attribution to PEs, based on different OECD Models and Commentaries, and identifies economic ownership as the “key issue” in the attribution of participations to PEs. The second part of this contribution, due for publication in the TPI June issue, will look into the tax consequences of attribution or non-attribution of participations to PEs, respectively, and give an outlook on crucial aspects in practice.
1. Introduction
1.1. Introduction to the Topic
During the last decades transfer pricing related topics gained a considerable amount of attention. In this respect, the OECD took the leading role and constantly revised the Model Tax Convention and Commentaries as well as the Transfer Pricing Guidelines.
Moreover, the OECD did not just focus on those topics in general, but also spotlighted the specific topic of profit attribution to permanent establishments (PEs). The work of the OECD resulted in the publication of two reports in 2008 and 2010 (also known as “Authorised OECD A...