Amendments to Permanent Establishment Status: Amendments With BEPS Action 7 on Permanent Establishment Status in a Constitutional Implementation Perspective

Anders Svejgaard Østerø & Christian Svejgaard Østerø

Student thesis: Master thesis


Within the last decade, there has been an increased focus on the tax liabilities of multinational enterprises. This invokes tax legislation aimed towards aggressive tax planning within these multinational enterprises. Hence, the OECD have launched their Base Erosion and Profit Shifting- project (BEPS) in 2013. This BEPS-project contains 15 so-called Actions that addresses aggressive tax planning for multinational enterprises in a global playing field era. Action 7, subtitled Preventing the Artificial Avoidance of Permanent Establishments, examines, and proposes amendments for the abusive strategies that have been utilized in preventing multinational enterprises from qualifying as having a permanent establishment. This Action 7 is this thesis’ main topic.
The main problem, that this thesis examines, is what the BEPS’ Action 7 changes to the qualification of the permanent establishment as well as the possibilities for implementation of the Action 7-amendments in Danish internal tax law.
Action 7-amendments relate to provision amendments to provision 4-6, in article 5, in the OECD Model Tax Convention. The respective commentary will be changed accordingly. Before this thesis examines with juridical dogmatic method, like e.g. interpreting the Danish National Tax Tribunal’s cases, the amendments to the permanent establishment article, article 5, the current article 5 will be examined. The general rule, in provision 1 to article 5, will also be examined, but it will not be closely examined like provision 4, 5, and 6, as it will not be amended. Main focus, therefore, will be on the article 5 (4) on auxiliary and preparatory character, article 5 (5) on the dependent agent rule, and article 5 (6) on the independent commissionaire rule.
In connection to the Action 7-amendments to the article 5 (4), (5), and (6), the constitutional effects will also be covered i.e. the implementation aspect. First, it will be examined whether the Action 7-amendments lead to constitutional thoughts. Afterward, the implementation analysis will be divided into two counterparts, or implementation approaches: the normal way or with the proposed multilateral instrument in Action 15. Finally, the compatibility with the prominent ECJ case law will be examined. The EU-commission’s anti-tax avoidance package will also shortly be covered in relation to Action 7.
In conclusion to this thesis, it is found that the Action 7-amendments’ impact are far-reaching, but the amendments still fall within soft-law status. The impact would thus be greatest if consummated through the multilateral instrument instead of protocols to the existing bilateral tax treaty network.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages127