Attribution of Profits to Permanent Establishments

S. 87Profit Attribution to PEs and PE Exemptions (Art 5 para 4) – Panel Discussion

MNE: Going back to the beginning of the BEPS process, it might be clear that the BEPS process was about tax avoidance, especially double non-taxation. It was not about the allocation of taxing rights. The difficulty was that, when it came to Action 7, there was clearly a tension between those two things (tax avoidance and allocation). By lowering the threshold for PEs, you are reallocating taxing rights. The question now is how much? I think the politically motivated tension drove the result in a sense that the OECD did not deal with the allocation question but just dealt with a lower threshold. From a UK perspective, the BEPS process is an unfinished business, and this is why the OECD is moving on with the Secretariat Proposal for a ‘Unified Approach’ under Pillar One released on 9 November 2019. Equally, in that context, I would note that the United Kingdom did not adopt the qualification of these specific PE exemptions. Why did the United Kingdom not adopt it? Because it has its own bespoken diverted profits tax to deal with ...