Dependent Agents as Permanent Establishments

S. 132I. Introduction

The existence of an agency permanent establishment requires the “habitual exercising of the authority to conclude contracts in name of the taxpayer”, under the text of article 5(5) of the OECD Model Tax Convention on Income and on Capital (OECD Model). The meaning of “exercising authority” has been discussed previously on this book. This chapter will focus on the term “habitually”.

There is little literature about the term “habitually”. Most of it refers to the concept in similar ways as an activity that is frequent and permanent rather than transitory. Case law is not abundant on this topic, either. Moreover, the guidance provided by the Commentary to the OECD Model is not particularly detailed with regard to this concept.

There is no general definition of “habitual exercise of authority”. Thus, this chapter aims to analyse the state of art regarding this concept and ascertain the possibility of establishing general standards or methods to describe “habitual exercise of authority”. A brief introduction will be provided regarding the term “dependent agent” and its three elements, followed by a study of the term “habitually” and a proposal of a potential general approac...