Tax Treaty Case Law around the Globe 2018

S. 81Chapter 8 Portugal: Can a Servicer Become an Agent Permanent Establishment?

João Félix Pinto Nogueira

8.1. Introduction

One of the trending discussions in international taxation is the taxation of business profits at source. This discussion comprises two aspects: (i) what can source countries do within the current legal framework; and (ii) what should source countries argue in order to increase the fairness of the system (and increase taxation at source).

The case reviewed in this chapter corresponds primarily with the first aspect. In a nutshell, it explores the limits of the agency permanent establishment (PE). Tax authorities invoked the concept of PE in an attempt to tax profits derived by a non-resident company considered active in its territory. The taxpayer invoked the limitations of the PE concept in order to demonstrate that the degree of presence of his business operations in the territory was not enough, in accordance with the existing rules, to satisfy the PE criterion and thus to allow the taxation of profits at source.

The case is about financial services. In particular, it concerns “servicing agreements” regarding non-performing loans (NPLs). For a proper understanding of...