Tax Treaty Case Law around the Globe 2021

S. 100I. Introduction

Attribution of profits to a permanent establishment (PE) has been a much discussed subject in the 21st Century. In 1998, the OECD commenced a major project on the subject that, following extensive consultation, resulted in the Report on the Attribution of Profits to Permanent Establishments ten years later. The reported note that the development of the resulting Authorised OECD Approach (AOA) was not constrained by either the original intent or by the historical practice and interpretation of Article 7. Rather, the intention was to formulate the preferred approach to attributing profits to a PE under Article 7 given modern-day multinational operations and trade.

The project, however, continued for another two years until publication of the 2010 OECD Model Treaty with a major revision to the text of Article 7 in order to reflect the conclusions in the report. The Commentary to the 2008 OECD Model was revised to take into account aspects of the report that were said not to conflict with the previous commentary with the full extent of the report reflected in the commentary to the revised Article 7 in the 2010 OECD Model.

The project proved to be controversial and the 2010...