Tax Treaty Case Law around the Globe 2020

S. 59Chapter 6 Belgium: Can IT Consultants Qualify as Permanent Establishments?

Anne de Vijver

6.1. Introduction

Generally, the profits from services performed in the territory of a state by an enterprise resident in another state are not taxable in the source state if the profits are not attributable to a permanent establishment (PE) situated therein. From a policy perspective, this starting point is supported for various reasons. First, services should be treated like other business activities and be subject to the same PE criteria. Second, the source taxation of profits from services would increase the compliance and administrative burden. Finally, since, in most cases, the enterprise would not have accounting records and assets in the source state, the determination of the taxable profits and collection of the relevant tax would be difficult.

However, increasing global mobility results in a worldwide trend of diluting the PE criteria for taxation in the source state. The mobility of services also raises objections to harsh PE criteria. This is the reason why some argue for additional source taxation rights for services. Two decisions of the Court of Appeal of Antwerp present a good oppo...