Dependent Agents as Permanent Establishments

S. 24I. Introduction

This brief chapter examines three recent developments related to the definition of a dependent agent permanent establishment (DAPE) in article 5 of the OECD Model Tax Convention on Income and Capital (the OECD Model), namely the revised proposals concerning the interpretation and application of article 5, which were published by the OECD in October 2012, as they relate to DAPEs; the recent series of cases on commissionaire structures; and the international acceptance of the new version of article 7 of the OECD Model which was adopted in 2010. To a certain degree, each of these three recent developments has become entwined with the current project of the OECD on base erosion and profit shifting (BEPS), and in the concluding remarks of this chapter, some additional material will be included with regard to that project.

II. Background Comments on DAPEs

By way of background to these three developments, it may be appropriate to offer a few general words about DAPEs. The underlying concept is that an enterprise that is resident in one contracting state may become taxable on its business profits in another (host) state even if it has no fixed place of business (falling within...