The organization for Economic Co-operation and Development (OECD) issued a request on 22 October 2013 for submissions of a “short description of strategies” that might be considered to result in the artificial avoidance of permanent establishment status in relation to base erosion and profit shifting (BEPS). This is part of an information gathering exercise that will help the OECD to formulate relevant anti-avoidance policies that can be recommended to governments.
Under domestic tax laws and the provisions of tax treaties a permanent establishment is often created when a non-resident company has a fixed base in the jurisdiction, but can also be created where a dependent agent has the right to negotiate contracts and habitually exercises that right. The latter provision in particular is often allegedly avoided by taxpayers by artificial means. In most jurisdictions a permanent establishment is created by construction or assembly projects that continue for a certain length of time, and companies are also sometimes suspected of trying to avoid this provision by artificial means.
The OECD released its BEPS action plan in July 2013, identifying 15 actions to address BEPS in a comprehensive manner. Action 7 of the BEPS Action Plan deals with strategies that result in the artificial
