Multinational enterprises operating across boarders need some kind of physical place of business in the foreign country to sell its products. These physical places will traditional have the status of a permanent establishment by which the foreign country will tax the derived income. Lately the digital economy have given these multinational enterprises the opportunity to use artificial arrangement to avoid permanent establish status. OECD has highlighted this issue in its BEPS project, which try to cope with multiple international tax issues through 15 action points.
OECD’s BEPS Action 7, seek to cope with the artificial avoidance of permanent establishment status by recommending sudden measures to prevent this. The aim of this thesis is to analyze these recommendations in OECD’s BEPS Action 7, and its significance to Danish legislation. Based on the commentaries OECD have received and the literature in this area, this thesis will interpret and analyze the new definition of permanent establishment in BEPS Action 7. Furthermore, this thesis will analyze Danish legislation regarding to the interpretation of the current permanent establishment and afterwards the significance of the new definition of permanent establishment for Danish legislation.
This thesis finds that the new definition cope with the artificial avoidance of permanent establishment as intended, but that the definition might be too wide and therefore include situations that was not intended with the BEPS project. Some of the newly announced test in the subparagraphs of the new definition of permanent establishment are much more subjective than before, and will lead to more uncertainty among the multinational enterprises. Furthermore, the new definition will be expected to have a significant impact to Danish legislation regarding to the Danish Double Tax Conventions. However, this thesis finds that it is not necessary to implement the new definition into Danish law, since Danish law regarding to the definition of permanent establishment follows the art. 5, in the Model Tax Convention.
|MSc in Auditing, (Graduate Programme) Final Thesis
|Number of pages
|Peter Koerver Schmidt