Attribution of Profits to Permanent Establishments

1. S. 100Introduction

One of the main problems with PEs is the absence of a single standard for PE profit attribution due to the scarce acceptance of the OECD’s Authorized Approach (AOA) in the international arena, the different country approaches to profit attribution to PEs, and the practical problems that the AOA presents in real life situations. As a result, there are multiple standards for attribution of profits to PEs (pre-2008, 2008, 2010) as well as variations depending on tax treaties and different country practices and frequent disputes in this area (MAPs and arbitration or judicial appeals). BEPS Actions 7 and 8-10 compounded the situation up to a point where uncertainty is the rule rather than the exception in this truly fundamental area of international tax law.

The main goal of this paper is not to study the features of the different systems of attribution of profits to PEs but rather to look into whether the OECD’s work in this area provides any certainty or meaningful progress, in particular, in the often controversial case of the attribution of profits to dependent agent PEs (DAPEs), with emphasis on ‘commissionaires’. Article 5 OECD MC (2017), in particular, paragraph 5, ...