Dependent Agents as Permanent Establishments

S. 206I. Introduction

The question of how to define a permanent establishment (hereinafter: PE) is quite disputed and has led to numerous discussions. One of the hot topics in this regard concerns how to deal with the exception clause of article 5(4) of the OECD Model. By comparing the 1963 and 1977 OECD Models in section II, a comprehensive examination of this issue will be given. Section III deals with the agent PE in connection with auxiliary and preparatory activities. Due to the different wording of the 1963 and 1977 OECD Models and the extent of discussions of the relevance of the exception clause for the agent PE, various concepts have arisen. Section III therefore reveals the development of the exception clause with regard to the dependent agent PE provision in recent decades. Section IV will provide the reader with an idea of the situations that fall under the exception clause and, in addition, under the dependent agent PE provision. Finally, an overview of the most important findings will be presented.

II. The Concept of Article 5(4) of the OECD Model

A. The general concept

Article 5(3) of the OECD Model (1963) provides as follows: