Transfer Pricing and Value Creation

1. S. 57Introduction

Transfer pricing and permanent establishments are two of the most present topics in international tax law although the concept of a permanent establishment and the need to price transactions within the same enterprise or between associated companies have existed for more than a century. The rapid growth of global value chains and the international phenomenon described as “globalization” have been possible due to the immense technological developments and the possibility to communicate, coordinate, and cooperate over nearly any distance in real time and with decreasing costs. The developments have accelerated through time, but the concepts and structures of international tax law remained unchanged or remained slow-moving. The BEPS project has brought new activity, and changes are introduced in an unprecedented speed between countries in the form of multilateral agreements and updated model conventions, commentaries and guidelines. Politics seems to have started the race and are the first to introduce new ways of taxing the “new economy”. The existence or nonexistence of permanent establishments is one of the key questions in taxation of international business profits ...