A permanent establishment (PE) is a fixed place of business that generally gives rise to income or value-added tax liability in a particular jurisdiction.
[2] Initially, the objective was to prevent double taxation between Prussian municipalities, and this was extended to the entire German federation.
[3] After years of preparatory works, in 1928, the League of Nations developed a model to tackle cross-border double taxation and to counter tax evasion.
The OECD Model Tax Convention includes a short indicative list of prima facie PEs.
Under those treaties, a building site or construction or installation project constitutes a PE only if it lasts more than a specified length of time.
Action 7 was targeted at Preventing the Artificial Avoidance of Permanent Establishment Status and proposes a large number of changes that are set to be included in the next version of the OECD Model Tax Convention.
The final report on Action 7 proposes substantial changes to the definition of Agency PE and stricter requirements to the exclusions provision:[25]"These changes will ensure that where the activities that an intermediary exercises in a country are intended to result in the regular conclusion of contracts to be performed by a foreign enterprise, that enterprise will be considered to have a taxable presence in that country unless the intermediary is performing these activities in the course of an independent business.