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Update on BEPS Action 7
The main purpose of the PE concept is to determine whether a contracting state has the right to tax the profits of an enterprise that is resident in the other contracting state. Taxand Luxembourg provides a critical overview of the proposals.
From the very beginning, the term PE has been at the heart of the discussions on the attribution of taxation rights in tax treaties. However, there has always been a general tendency to narrow the scope of the PE concept, which can be easily explained with the balanced import and export activities of OECD member countries.
Action 7 of the BEPS (Base Erosion and Profit Shifting) Action Plan calls for developing changes to the PE concept in the OECD model convention in order to prevent perceived abuses of the threshold that needs to be exceeded for a PE to exist.
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