Base Erosion and Profit Shifting (BEPS)

I. S. 84Introduction

The agency permanent establishment (agency PE) provision, contained in article 5, paragraphs 5 and 6 (article 5(5) and article 5(6)) of the OECD Model, is one of the most debated topics in the current international tax environment. This provision, indeed, after its first introduction by the Organization for European Economic Co-operation (OEEC) in 1956, has recently been under the scrutiny of some international courts and the OECD. Today, this provision is one of the core topics of the OECD/G20 project on Base Erosion and Profit Shifting (BEPS), which is analysing it under the work on Action 7.

This chapter will present the topic of agency PE and discuss its recent developments. Section II will illustrate the current status of the agency PE provision, while section III will present the current problems embedded in this provision. Next, sections IV and V will highlight the OECD debate on this topic, by presenting the solutions previously proposed by the OECD Working Party and the OECD proposals under BEPS Action 7.

II. The Current Status of the Agency PE Provision

The current OECD definition of an agency PE can be found under article 5(5) and article 5(6) of the OECD Mod...