ICC Document & publication

ICC Comments to the OECD Revised Discussion Draft BEPS Action 7 “PE Status” (2015)

The International Chamber of Commerce (ICC) reiterated international business concerns in its submitted comments to the OECD’s proposals on Permanent Establishment (PE) Status within the context of the G20 endorsed OECD/BEPS project.

Within the context of the G20/OECD Base Erosion and Profit Shifting (BEPS) project the Organisation of Economic Cooperation and Development (OECD) issued a Revised Discussion Draft on Action 7 “Preventing the Artificial Avoidance of PE Status”. The first discussion draft was released on 31 October 2014 and ICC provided feedback.

ICC continues to believe that the proposed measures will not only impact commissionaire arrangements, but also a wide range of arrangements used for making direct sales or providing sales support. Furthermore, ICC recommends that appropriate weight be given to the nature of the activities and the functions being performed, outside the territory in which the PE is argued to exist.

ICC is highly concerned about the boundaries of the terms ´complementary functions´ and ´cohesive business operations´. The wording proposed by the OECD disregards any separate entity reporting and introduces a wide force of attraction rule. ICC calls for further guidance to be provided to differentiate between ordinary business arrangements and abusive cases.

While welcoming the assurance that the attribution of profit to PEs will be examined during 2016, ICC remains highly concerned that a project intended to tackle BEPS seems to result in a wider reconsideration of the allocation of taxing rights between source and residence countries. This will lead to an increased risk of double taxation unless there is a very clear consensus as to the precise detail of how the new approach will be applied, including objective (rather than subjective) criteria and “bright lines” tests, supported by clarifying examples.