Marlies de Ruiter

Marlies de Ruiter has been nominated this year for her work connected to the OECD’s Revised Proposals on Article 5 (permanent establishment) of the OECD Model Tax Convention, as head of the Tax Treaties, Transfer Pricing and Financial Transactions Division.

The interpretation of PE is evolving as business adapts to a more global environment. Technological advancements, more tax treaties and the realities of business transactions mean the definition of PE is changing.

The OECD does not think the guidelines cater for the way companies and government now define PE.

Based on the current draft, however, some concerns are still being raised.

Queries have been raised over the mention in the draft of “space at the disposal of”, because the notion of “having the power to use” a location is difficult to apply, if, as suggested during the OECD consultation meeting, it means something less than a legal right to use a location.

“While the first example given by the OECD, at proposed paragraph 4.2 (exclusive legal right to use or legal possession), is quite straightforward, the second one, which deals with an enterprise being “allowed to use” a location where it performs its business activities on a continuous basis during an extended period of time, is not nearly as limpid,” says Francois Vincent of KPMG in France.

“More specifically, it becomes difficult to delineate how being allowed to use space is equal to having the power to use that space; unless “being allowed” means being conferred the power to use that space, under something like a formal authorisation - which may come pretty close to a legal right to use - rather than passive acceptance of the use of space; which was part of the original concern expressed by BIAC that led to the recommendation to replace existing paragraph 4.2,” Vincent adds.

In June 2013, the OECD Committee on Fiscal Affairs released for public comment a discussion draft on the tax treatment of various payments that may be made following the termination of an employment, as part of the changes to permanent establishment. These comments have now been posted online and are being considered by de Ruiter and her team.