Dependent Agents as Permanent Establishments

S. 184I. Introduction

This chapter is the result of the research presented at the 20th Symposium on International Tax Law, organized by the Institute for Austrian and International Tax Law and hosted by the Vienna University of Economics and Business. The Symposium was dedicated to the discussion of the dependent agent permanent establishment – more specifically focusing on paragraphs 5 and 6 of article 5 of the OECD Model Convention (OECD Model). Brief considerations of article 5(5) and (6) will be followed by a discussion of the meaning of the term “ordinary course of business”, also taking into account what can be gleaned from case law on this topic.

A. Permanent establishments

Under article 7 of the OECD Model, the contracting source state cannot tax the business activities of an enterprise from the other contracting state unless such activities are carried on through a permanent establishment. This is one of the most relevant concepts currently under discussion in the OECD Model and is defined by article 5 of thereof. Despite its existing definition in the OECD Model, there are still several problematic issues arising from the attempt to characterize a permanent establishment. Such iss...