Tax Treaty Case Law around the Globe 2018

S. 65Chapter 7 India: Formula One World Championship Case – Three Days May Be Sufficient to Constitute a Fixed Place PE

D.P. Sengupta

7.1. Introduction

In the context of the digital economy, the ongoing OECD BEPS Project mentions the inadequacies of the PE concept as the nexus for taxation by the source countries but could not reach any consensus. That the current PE threshold can be easily avoided is implicit from the very adoption of Action Point 7 – Preventing the artificial avoidance of PE status. In the final action plan in this regard, the OECD considered only the commissionaire arrangement and similar strategies for avoiding agency PE status; the use of specific exception in article 5(4) of the OECD Model and splitting up of contracts in the case of a construction PE. The main criterion for the PE threshold, however, continues to be the existence of a “fixed place of business”. But what exactly is a fixed place of business?

It is generally assumed that to be a fixed place through which a business is carried on, the place must be “at the disposal” of the enterprise. However, the term is not used in article 5(1) itself. The Commentary on the OECD Model also does not define the term but...