Tax Treaty Case Law around the Globe 2012

Greece: Construction Permanent Establishment

7.1. Introduction

The decision of the Supreme Administrative Court in case 838/2011 discussed the issue of whether an Austrian company that formed a consortium with a Greek company and then jointly undertook a project in Greece that involved, among other things, the maintenance of a construction site in Greece for more than 12 months, acquired a permanent establishment in Greece. The dispute arose in 1996 and it was judged under the Greece-Austria income tax treaty then in force. Article 5 of the 1971 Greece-Austria income tax treaty on the definition of the term “permanent establishment” followed the pattern of article 5 of the OECD Model Tax Convention (OECD Model). Similarly, the provisions of article 7 of the 1971 Greece-Austria income tax treaty, regarding the taxation of business profits, followed the pattern of article 7 of the OECD Model.

7.2. Facts of the case

In 1996, a consortium formed by a Greek SA and an Austrian GmbH was awarded a contract by the Public Electricity Company. A consortium is not an entity under Greek company law; it does not posses legal personality and it is not a taxable person. Under the terms of the contract...