Tax Treaty Case Law around the Globe 2020

S. 65Chapter 7 Sweden: Construction Permanent Establishment

Martin Berglund

7.1. Introduction

Case HFD 2019 ref. 36 mainly concerns the interpretation of the 12-month test in the construction permanent establishment (PE) clause in the Poland-Sweden Income Tax Treaty (2004). In the PE definition in Swedish domestic tax law, there is no 12-month requirement for construction activities. Instead, construction activities are listed as one example of a PE, alongside, e.g. offices and factories. However, article 5(3) of the treaty contains a construction PE clause that is partially similar to the corresponding paragraph in the OECD Model Tax Convention (OECD Model). It reads: “A building site or a construction, assembly or installation project or supervisory activities in connection therewith constitutes a permanent establishment only if such site, project or activities continue for a period of more than twelve months.”

The clause may have a somewhat broader scope of application than it does in the OECD Model, since it also covers assembly projects and supervisory activities in connection with the activities that are first mentioned in the paragraph. In that respect, the rule is identical to that ...