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Category: Permanent Establishments

A permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on.

  • There has to a ‘place of business ’ taking examples such as premises or, in certain circumstances machinery or equipment;
  • The place of business must be “fixed” meaning it must be established at a distinct place with a certain degree of permanence;
  • The business of the enterprise must be carried out through this fixed place of business. Meaning that it should be persons who, in one way or another, are dependent on the enterprise (personnel) that conducts the business of the enterprise.

India vs Mastercard, June 2018, AAR No 1573 of 2014

The issue in this case was whether Mastercard Asien Pasific Ltd has a permanent establishment in India as regards the use of a global network and infrastructure to process card payment transactions for customers in India and as regards other related activities. India’s Authority for Advance Rulings found that that Mastercard’s activities in India created a permanent establishment under several different theories. The AAR also concluded that processing fees paid to Mastercard’s regional headquarters in […]

Nokia paid 202 million euro to settle a long running dispute with the tax authorities in India

Under the Mutual Agreement Procedure (MAP), Finland and India have settled a long running tax dispute involving Nokia. The tax authorities in India issued a tax assessment to Nokia for violating withholding tax regulations in India while making royalty payments to its parent company in Finland. An additional assessment was then issued by the tax authorities in India to the parent company in Finland for the same transaction as – according to the tax authorities […]

France vs Valueclick Ltd. March 2018, CAA, Case no 17PA01538

The issue in the case before the Administrative Court of Appeal of Paris was whether an Irish company had a PE in France in a situation where employees of a French company in the same group carried out marketing, representation, management, back office and administrative assistance services on behalf of the group. The following facts were used to substantiate the presence of a French PE: French employees negotiated the terms of contracts and were involved in drafting […]

France vs. Google, July 2017, Administrative Court

In this case the French tax administration argued that Google had a permenent establishment in France because the parent company in the US and its subsidiary in Ireland had been selling a service – online ads – to customers in France. The administrative court found that Google France did not have the capability to carry out the advertising activities on its own. Google Ireland Limited therefore did not have a permanent establishment in France. Share:

Sweden vs S BV, 16 June 2017, Administrative Court, case number 2385-2390-16

In this case S BV is not granted deductions in its Swedish PE for interest on debt relating to the acquisition of subsidiaries. The Court of Appeal considers that it is clear that key personnel regarding acquisition, financing and divestment of the shares in the subsidiary and the associated risks have not existed in the PE. It is also very likely that the holding of the shares has not been necessary for and conditioned by […]

India vs Formula One World Championship Ltd, April 2017, India’s Supreme Court

India’s Supreme Court found that Formula One World Championship which conducts Formula One racing events, has a permanent establishment (PE) for its business in India and income accruing from it is taxable. “We are of the opinion that the test laid down by the Andhra Pradesh High Court in Visakhapatnam Port Trust case fully stands satisfied. Not only the Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out, […]

Australia vs. Tech Mahindra Limited, September 2016, Federal Court, Case no. 2016 ATC 20-582

This  case is about the interpretation of Article 7 (the business profits rule) and Article 12 (the royalties provision) of the Agreement between the Government of Australia and the Government of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The issue was misuse of the provision in article 12 about cross-border royalties and article 7 about business profits. The case was brought before the Supreme Court, […]

Spain vs. Dell, June 2016, Supreme Court, Case No. 1475/2016

Dell Spain is part of a multinational group (Dell) that manufactures and sells computers. Dell Ireland, operates as distributor for most of Europe. Dell Ireland has appointed related entities to operate as its commissionaires in several countries; Dell Spain and Dell France are part of this commissionaire network. The Dell Group operates through a direct sales model. Purchase orders are placed on a web page or in a call centre. Dell Spain operated as a full-fledged distributor. After the restructuring, […]

Netherlands vs X BV, June 2016, Supreme Court, Case No 2016:1031 (14/05100)

In 1996, X BV acquired the right to commercially exploit an intangible asset (Z) for a period of 15 years for $ 63.5 million. X BV then entered a franchise agreements with group companies for the use of Z, including a Spanish PE of Y BV. According to the franchise agreement Y BV paid X BV a fee. According to X, in the calculation of the loss carry forward in Spain the franchise fee should […]

Spain vs. INC Bank, July 2015, Spanish National High Court

In the INC bank case the tax administration recharacterised part of the interest-bearing debt of the bank branch as “free” capital, with the consequent reduction of the tax-deductible expenses for debt interest. The adjustment made in relation to year 2002 and 2003 was based on the Commentaries on the OECD Model Convention approved in 2008 The court did not agree with the “dynamic interpretation” of Article 7 applied by the tax administration, in relation to […]

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