The OECD today released guidance on the attribution of profits to permanent establishments (PEs), reflecting changes made to the PE standards in the final report to Action 7 of the OECD/G20 base erosion profit shifting (BEPS) plan and to Article 5 of the OECD Model Tax Convention.
The new guidance includes examples of attribution of profits in a commissionnaire structure for the sale of goods, an online advertising sales structure, and a procurement structure.
It includes guidance related to permanent establishments created as a result of the changes to Article 5(4) of the OECD Model Tax Convention and provides an example on the attribution of profits to permanent establishments arising from the anti-fragmentation rule included in Article 5(4.1).
The guidance sets out high-level general principles, taking into consideration the revised transfer pricing guidance developed during the BEPS process on aligning transfer pricing outcomes with value creation.
Countries have agreed that these principles are relevant and applicable in attributing profits to permanent establishments.
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