The Attribution of Profits to Permanent Establishments: The taxation of intra-company dealings

A new book edited by my friend Raffaele Russo and with preface by Kees van Raad, has been recently published by the IBFD. This book deals with one of the most complex subjects of the international tax, the attribution of profits to permanent establishments (PEs). The book begins by examining how the dealings between a PE and the enterprise of which it is a part should be treated for tax treaty purposes. An overview of the historical development of Article 7 of the OECD Model Convention is provided, starting with the Draft Conventions prepared by the League of Nations up to the current OECD Model and Commentary, and taking into account the recent OECD Discussion Drafts. Part II is a comparative survey on the tax consequences of dealings between different parts of the same enterprise on the basis of the domestic law of the countries covered. Four different cases are scrutinized: (1) the transfer of assets (both fixed assets and trading stock); (2) the use of intangibles; (3) the provision of services; and (4) the transfer of funds. The survey covers 19 countries: Argentina, Austria, Belgium, Brazil, Canada, Chile, Finland, France, Germany, India, Italy, Mexico, the Netherlands, South Africa, Spain, Switzerland, the United Kingdom, the United States and Venezuela. Finally, Part III includes an analysis of selected issues, such as the application of the PE non-discrimination clause, the effects of EC legislation and possible source taxation in relation to the tax treatment of intra-company dealings. Having the book in my hands, I decided to invite Raffaele Russo to an interview, so that I can challenge him to tell the readers a bit more of the contents of the book and his ideas about International and EU tax. In fact, I plan to start a new feature on this blog - “Interview Tax”.