Common use of PERMANENT ESTABLISHMENT Clause in Contracts

PERMANENT ESTABLISHMENT. See treaty text. This Article defines the term “permanent establishment”. The profits of an enterprise of one of the Contracting States can only be taxed on an arising basis in the other Contracting State to the extent that they are attributable to a permanent establishment in that other State. This Treaty broadly uses the OECD and UN definitions. Three types of permanent establishment are envisaged: A fixed place of business, a service permanent establishment and an agency permanent establishment. Fixed placed of business In this context a “permanent establishment” means a fixed place of business through which the business of the enterprise is wholly or partly carried on. The list of types of establishment particularly included follows the UN Model and involves: • A place of management; • A branch; • An office; • A factory; • A workshop; • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and • A building site, construction or assembly or installation project which lasts for more than six months. Supervisory activities in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention. According to the OECD Commentary, a “fixed place of business” means to be established at a distinct place with a certain degree of permanence, however, it could be a pitch in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create a permanent establishment for Company A in the country of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at a specific geographic point. However, if the permanent establishment consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soil. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries will not consider a presence of less than six months to give rise to a fixed place. The usual exclusions from the definition of permanent establishment are given so that the following will not constitute a permanent establishment:

PERMANENT ESTABLISHMENT. See treaty text. This Article defines the term “"permanent establishment”," a term that is significant for several articles of the Convention. The existence of a permanent establishment in a Contracting State is necessary under Article 7 (Business Profits) for the taxation by that State of the business profits of an enterprise a resident of one of the Contracting States can only be taxed on an arising basis in the other Contracting State State. Since the term "fixed base" in Article 15 (Independent Personal Services) is understood by reference to the extent that they are definition of "permanent establishment," this Article is also relevant for purposes of Article 15. Articles 10, 11 and 12 (dealing with dividends, interest, and royalties, respectively) provide for reduced rates of tax at source on payments of these items of income to a resident of the other State only when the income is not attributable to a permanent establishment or fixed base that the recipient has in that other the source State. This Treaty broadly uses The concept is also relevant in determining when a Contracting State may impose a branch tax under Article 14 (Branch Tax) and certain "other income" under Article 24 (Other Income). Paragraph 1 The basic definition of the OECD and UN definitions. Three types of permanent establishment are envisaged: A fixed place of business, a service permanent establishment and an agency term "permanent establishment" is contained in paragraph 1. Fixed placed of business In this context a “permanent establishment” As used in the Convention, the term means a fixed place of business through which the business of the an enterprise is wholly or partly carried on. The list Paragraph 2 Paragraph 2 lists a number of types of fixed places of business that constitute a permanent establishment. This list is illustrative and non-exclusive. According to paragraph 2, the term permanent establishment particularly included follows the UN Model and involves: • A includes a place of management; • A , a branch; • An , an office; • A , a factory; • A , a workshop; • A , a warehouse, in relation to a person performing storage facilities for others, and a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and • A building site, construction or assembly or installation project which lasts for more than six months. Supervisory activities As indicated in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention. According to the OECD CommentaryCommentaries (see paragraphs 4 through 8), a “fixed place of business” means general principle to be established at a distinct place with a certain degree of permanence, however, it could be a pitch observed in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create determining whether a permanent establishment for Company A in exists under paragraphs 1 and 2 is that the country of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at “fixed” in the sense that a specific geographic pointparticular building or physical location is used by the enterprise for the conduct of its business, and that it must be foreseeable that the enterprise’s use of this building or other physical location will be more than temporary. HoweverThe use of singular nouns in this illustrative list is not meant to imply that each such place of business constitutes a separate permanent establishment. In the case of mines or xxxxx, for example, several such places of business could constitute a single permanent establishment if the permanent establishment consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soilproject forms a commercial and geographical whole. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries Paragraph 3 Paragraph 3 describes several additional activities or business sites that will not consider a presence of less than six months to give rise to a fixed place. The usual exclusions from the definition of permanent establishment are given so that the following will not constitute a permanent establishment:. Paragraph 3(a) adds that the term "permanent establishment" may include a building site or a construction, assembly or installation project, or supervisory activities connected with such sites or projects. It may include, as well, a drilling rig or ship used for the exploration or exploitation of natural resources. The sites or activities described in subparagraph

PERMANENT ESTABLISHMENT. See treaty text. text This Article defines the term “permanent establishment”. The profits of an enterprise of one of the Contracting States can only be taxed on an arising basis in the other Contracting State to the extent that they are attributable to a permanent establishment in that other State. This Treaty broadly uses the OECD and UN definitions. Three Two types of permanent establishment are envisagedset out: A fixed place of business, business and a service permanent establishment and an agency permanent establishmentdependent agent. Fixed placed place of business In this context a “permanent establishment” means a A fixed place of business through which the business of the enterprise is wholly or partly carried onon will constitute a permanent establishment. The list of types Types of establishment particularly included follows involve the UN Model and involvesfollowing: • A place of management; • A branch; • An office; • A factory; • A workshop; • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; • An agricultural, pastoral or forestry property; and • A building site, construction or assembly or installation project which lasts exists for a period of more than six months. Supervisory activities in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention. According to the OECD Commentary, a “fixed place of business” means to be established at a distinct place with a certain degree of permanence, however, it could be a pitch in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create a permanent establishment PE for Company A in the country State of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at a specific geographic point. However, if the permanent establishment PE consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soil. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries will not consider a presence of less than six months to give rise to a fixed place. The usual exclusions from Paragraph 4 is not contained in the definition of permanent establishment are given so OECD Model Convention. This provision states that the following an enterprise will not constitute a permanent establishmentestablishment and business will be carried through that permanent establishment if:

PERMANENT ESTABLISHMENT. See treaty text. This Article defines the term “permanent establishment”. The profits of an enterprise of one of the Contracting States can only be taxed on an arising basis in the other Contracting State to the extent that they are attributable to a permanent establishment in that other State. This Treaty broadly uses the OECD and UN definitions. : Three types of permanent establishment are envisaged: A fixed place of business, a service permanent establishment and an agency permanent establishment. Fixed placed of business In this context a “permanent establishment” means a fixed place of business through which the business of the enterprise is wholly or partly carried on. The list of types of establishment particularly included follows the UN Model and involvesinvolve: • A place of management; • A branch; • An office; • A factory; • A workshop; • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and • A building site, construction or assembly or installation project which lasts for more than six months. Supervisory activities in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention. According to the OECD Commentary, a “fixed place of business” means to be established at a distinct place with a certain degree of permanence, however, it could be a pitch in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create a permanent establishment for Company A in the country of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at a specific geographic point. However, if the permanent establishment PE consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soil. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries will not consider a presence of less than six months to give rise to a fixed place. The usual exclusions from the definition of permanent establishment are given so that the following will not constitute a permanent establishment:

PERMANENT ESTABLISHMENT. See treaty text. This Article defines the term “permanent establishment”. The profits of an enterprise of one of the Contracting States can only be taxed on an arising basis in the other Contracting State to the extent that they are attributable to a permanent establishment in that other State. This Treaty broadly uses the OECD and UN definitions. : Three types of permanent establishment are envisaged: A fixed place of business, a service permanent establishment and an agency permanent establishment. Fixed placed of business In this context a “permanent establishment” means a fixed place of business through which the business of the enterprise is wholly or partly carried on. The list of types of establishment particularly included follows the UN Model and involvesincludes: • A place of management; • A branch; • An office; • A factory; • A workshop; • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and • A building site, construction or assembly or installation project which lasts for more than six months. Supervisory activities in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention. According to the OECD Commentary, a “fixed place of business” means to be established at a distinct place with a certain degree of permanence, however, it could be a pitch in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create a permanent establishment for Company A in the country of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at a specific geographic point. However, if the permanent establishment PE consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soil. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries will not consider a presence of to less than six months to give rise to a fixed place. The usual exclusions from the definition of permanent establishment are given so that the following will not constitute a permanent establishment:

PERMANENT ESTABLISHMENT. See treaty text. This Article defines the term “permanent establishment”. The profits of an enterprise of one of the Contracting States can only be taxed on an arising basis in the other Contracting State to the extent that they are attributable to a permanent establishment in that other State. This Treaty broadly uses the OECD and UN definitions. Three types of permanent establishment are envisaged: A fixed place of business, a service permanent establishment and an agency permanent establishment. Fixed placed of business In this context a “permanent establishment” means a fixed place of business through which the business of the enterprise is wholly or partly carried on. The list of types of establishment particularly included follows includes the UN Model and involvesusual ones: • A place of management; • A branch; • An office; • A factory; • A workshop; • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and • A building site, construction or assembly or installation project which lasts for more than six months. Supervisory activities in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention; and • Supervisory activities in connection with the sale of equipment or plant are also included unless the costs for supervision amount to less than 5% of the total amount of the sale and are considered auxiliary to the sale (included via the Protocol). According to the OECD Commentary, a “fixed place of business” means to be established at a distinct place with a certain degree of permanence, however, it could be a pitch in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create a permanent establishment PE for Company A in the country of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at a specific geographic point. However, if the permanent establishment consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soil. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries will not consider a presence of less than six months to give rise to a fixed place. The usual exclusions from the definition of permanent establishment are given so that the following will not constitute a permanent establishment:

PERMANENT ESTABLISHMENT. See treaty text. This Article defines the term “permanent establishment”. The profits of an enterprise of one of the Contracting States can only be taxed on an arising basis in the other Contracting State to the extent that they are attributable to a permanent establishment in that other State. This Treaty broadly uses the OECD and UN definitions. Three types of permanent establishment are envisaged: A fixed place of business, a service permanent establishment and an agency permanent establishment. Fixed placed of business In this context a “permanent establishment” establishment means a fixed place of business through which the business of the enterprise is wholly or partly carried on. The list of types Types of establishment particularly included follows involve the UN Model and involvesfollowing: • A place of management; • A branch; • An office; • A factory; • A workshop; • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and • A building site, construction or assembly or installation project which lasts for more than six 18 months. Supervisory activities in connection with such activities are also included. Note the departure here from the more usual period of 12 months, reflecting the use of the UN Model Convention. According to the OECD Commentary, a “fixed place of business” means to be established at a distinct place with a certain degree of permanence, however, it could be a pitch in a market place, or even part of the premises of another enterprise. There is no requirement that the premises be owned. The Commentary offers the example of an employee of Company A who is allowed to use an office at the premises of Company B. This could create a permanent establishment for Company A in the country of Company B if the arrangement persists for long enough and if the employee is carrying out activities which are more than merely “preparatory or auxiliary” (see below). The OECD considers that to be fixed, a place of business must be at a specific geographic point. However, if the permanent establishment consists of mechanical equipment only, then there is no requirement for mechanical equipment to be fixed to the soil. As to what constitutes a reasonable period of time to give the necessary degree of permanence, most countries will not consider a presence of less than six months to give rise to a fixed place. The usual exclusions from the definition of permanent establishment are given so that the following will not constitute a permanent establishment: