《PERMANENT ESATBLISHMENT SERIES ON INTERNATIONAL TAXATION》

PART ONE: INTRODUCTION1

1 Preliminary issues1

1.1 Permanent Establishment: A commercially separate but legally integrated entity1

1.2 The problems treated by this study2

1.3 The comparative technique and the study of PE5

1.4 Reasons for using a PE rather than a subsidiary: An overview8

1.5 The effect of the presence of a PE: An overview9

1.6 The terminology of the present work10

2 Some constitutive political and economic elements of international society13

2.1 Growth of political independence13

2.2 Increased economic interdependence14

2.3 Qualitative (structural) changes in international business15

2.4 Heterogeneity in the world and homogeneity within groups16

2.5 Recognition of the necessity of international law16

2.6 Summary and conclusions17

3 Theories on allocation of international taxing jurisdiction19

3.1 Introduction19

3.2 The "realistic theory" in legal doctrine20

3.3 Economic versus residential and political allegiance22

3.4 The equivalence theory24

3.5 The faculty theory25

3.6 The neutrality theory26

3.7 The PE principle and inter-nations neutrality29

4 Main elements in a tax-treaty policy on PE: Basic contradictions33

4.1 Net capital-importing and exporting countries33

4.2 Countries with competitive business sectors versus countrieswith less competitive business34

4.3 Significant legislative differences35

4.4 Treaties between developed and developing countries36

4.5 Summary37

5 Methodology: Sources of international fiscal law39

5.1 The problem: What are the principles of tax-treaty interpretation?39

5.2 The tax treaty as a source of law40

5.3 The context of the treaty44

5.4 Definitions in domestic laws49

5.5 Custom as a source of tax treaty law55

6 General historical background: An overview65

6.1 The end of the 19th century: The relative immobility of production factors65

6.2 The present situation: Mobile production factors67

6.3 Restructuring of international law and institutions68

6.4 Summary and conclusion69

7 The history of the concept of PE71

7.1 General71

7.2 1845-1909: PE emerges in Prussian law and the law of the German Empire72

7.3 1899-World War I: PE is adopted in international treaties75

7.4 PE and the re-evaluation of the principle of source-state taxation (1920s-World War II)77

7.5 Bilateral treaties in the 1930s: A PE fiction for construction work87

7.6 Revolution and Contrarevolution: The Mexico and London model conventions (the 1940s)88

7.7 Consolidation of the residence-state principle (1950s-1960s)96

7.8 Re-evaluation of the principle of residence-state taxation (mid-1960s - ?)97

7.9 Conclusion101

8 Classification of PE conditions103

8.1 The OECD classification103

8.2 The US classification104

8.3 Recent German classification105

8.4 Swiss doctrine before the Second World War106

8.5 Classification in the present work106

PART TWO: THE BASIC RULE109

A - THE OBJECTIVITY OF THE PE109

9 The taxpayer’s physical presence: The "place of business test"111

9.1 Introduction111

9.2 A list of examples: The "positive list"113

9.3 Branches and places of management115

9.4 Natural resources118

9.5 Machinery or equipment as "place of business"?119

9.6 Securities and bank accounts as a "place of business"?121

9.7 Software and patents as a "place of business"?122

9.8 Human beings and animals as a "place of business"?122

9.9 Summary and conclusion123

10 Physical presence at a specific place: The "location test"125

10.1 General125

10.2 Always sufficient for PE status: Fixed location of the center of the activity126

10.3 The peripatetic place of business: Location of the activity within a spatially delimited area?128

10.4 Summary and conclusions: Is there still one "location test" for onshore and offshore business?147

B - THE SUBJECTIVITY OF THE PE153155

11 The right to use the place of business: The "right of use test"155

11.1 General155

11.2 Historical background156

11.3 The problem: A "factual" or a "legal" approach?157

12 The "right of use test" for profit-sharing arrangements159

12.1 Introduction159

12.2 The partnership as an agency PE?163

12.3 Actual or deemed use of a fixed place of business?167

13 The "right of use test" and arm's-length business connections187

13.1 Introduction187

13.2 Joint-venture-like co-operation with a client187

13.3 Leasing and franchising of business assets and business facilities191

13.4 Use of facilities belonging to other business connections195

13.5 The performance of auxiliary activities196

14 Indirect evidence of a right of use to a place of business201

14.1 Commercial activities in dwellings and home offices201

14.2 Hotel rooms and the "right of use test"204

14.3 Employees' use of employer's facilities205

14.4 Other possible evidence of a right of use to a place of business?206

15 The duration of the right to use the place of business: The "permanence test"209

15.1 General209

15.2 Analogy from the time threshold for construction PE?210

15.3 Criteria for the "permanence test"217

C - THE FUNCTIONALITY OF THE PE227

16 Introduction229

16.1 The four aspects of the "business activity test"229

16.2 Inconsistent terminology230

16.3 Treaties without a general definition of the basic rule230

17 Business activities excluded in the treaties233

17.1 International shipping and air transport233

17.2 Agriculture, forestry, and fishing242

18 The domestic-law aspect: Income-generating activities distinguished from "business" in the treaties245

18.1 The significance of domestic laws245

18.2 Management and maintenance of real estate versus business operations251

18.3 Management of securities260

18.4 Management of licenses: Royalty income267

18.5 Personal services272

18.6 Summary and main conclusions276

19 Core business activity or auxiliary or preparatory activities? The tax-treaty aspect of the concept of "business"279

19.1 Overview279

19.2 Background in older tax treaties281

19.3 The OECD alternative "essential and significant" activities283

19.4 Categories of core business activities299

19.5 Categories of auxiliary business activities307

20 The connection between the business and the place of business: The "business connection test"327

20.1 Introduction327

20.2 The "attraction approach"：A place of business serving core business activities within the same jurisdiction328

20.3 A place of business supporting a core business activity outside the jurisdiction of the treaty333

20.4 The "force of attraction principle" of the UN model treaty335

PART THREE: CONSTRUCTION WORK343

21 Introduction: The construction clause and its relationship to the basic rule343

21.1 General343

21.2 Tax treaties with a construction clause344

21.3 Tax treaties without a construction clause347

21.4 Conclusions351

22 The objectivity of the construction PE: Identification353

22.1 The "place of business test" under the construction clause353

22.2 Identification of construction projects: Preliminary issues354

22.3 Conditions for identification359

22.4 The multilateral Nordic treaties: From specific provisions back to the OECD approach379

23 The subjectivity of the construction PE: The "duration test"381

23.1 Overview: 12-month, 6-month or 30-day duration?381

23.2 The start of the "duration test"384

23.3 The termination of the construction project385

23.4 Interruptions during the construction period386

24 The functionality of the construction PE: The "business activity test"391

24.1 Introduction: The problems391

24.2 The main issue: The "constructional" or "functional" aspect of the project?393

24.3 Physical or "intellectual" parts of the construction work: Planning and supervision405

24.4 Construction work for an enterprise’s own purposes414

PART FOUR: OFFSHORE BUSINESS ACTIVITIES419

25 Introduction419

25.1 The main issues419

25.2 A brief historical outline421

26 Outline of offshore PE fictions425

26.1 Introduction425

26.2 The US alternative: PE taxation under the "drilling rig clause"426

27 Offshore identification provisions in the tax treaties between Norway and the US, the UK, France,and the' Nordic states435

27.1 General435

27.2 Overview of some bilateral offshore identification provisions435

27.3 Identification when all assignments are performed offshore437

27.4 Identification of offshore and onshore assignments441

28 The "business activity test" of the offshore clause445

28.1 Overview445

28.2 The geographical criterion: Offshore activities445

28.3 The functional criterion: Exploration and exploitation of natural resources450

28.4 Brief survey of special treaties concerning the North Sea458

28.5 Final observations460

PART FIVE: AGENCIES463

29 Introduction463

29.1 Preliminary remarks463

29.2 Overview of the agency clause464

29.3 The basic rule as an alternative to the agency clause466

29.4 The proceeding discussion470

30 Main trends in the development of the agency clause471

30.1 The agency clause in German domestic laws471

30.2 Tax-treaty law: Early issues (until the end of the 1920s)473

30.3 Criteria for agency PE under the later model treaties of the League of Nations (1929-1946)476

31 The agent and the authorization: The objectivity of the agency PE481

31.1 Introduction481

31.2 The agent481

31.3 Commission or operations under one's own name ?487

31.4 The signing of the contracts489

31.5 Authorization as qualification for an agency PE490

32 "Legal" or "commercial" dependence: The subjectivity of the agency PE503

32.1 Introduction503

32.2 Merging of business interests: Criteria for dependency under the agency clause508

33 Deemed dependency: The "ordinary course of business test"515

33.1 Introduction515

33.2 Typical of the enterprise: Or typical of the industry?516

33.3 Recourse to the "dependence test"519

33.4 Summary521

34 The functionality of the agency PE523

34.1 The business concept under the agency clause523

34.2 The "habitual exercise test"525

35 UN model treaty deviations from the OECD agency clause529

35.1 Overview529

35.2 The "stock of goods test" for agency PE529

35.3 The "single principal test"531

35.4 The UN provisions concerning insurance agents532

PART SIX: SUBSIDIARY AS PE539

36 PE through related corporations539

36.1 Introduction539

36.2 Treaty-based protection of controlled companies540

36.3 Conditions for subsidiary PE542

36.4 Summary and conclusions: Pressure on the PE concept as an alternative to unitary taxation?553

PART SEVEN: SUMMARY AND CONCLUSIONS557

37 Summary and conclusions557

37.1 De lege ferenda: Background and policy issues557

37.2 De lege lata: Summary of conditions for PE560

37.3 Conclusion: Erosion of the PE principle571

37.4 Abandon the "fixed place of business test"574

Bibliography577

Table of cases589

Official documents603

Index607

PART ONE: INTRODUCTION1

1 Preliminary issues1

1.1 Permanent Establishment: A commercially separate but legally integrated entity1

1.2 The problems treated by this study2

1.2.1 Overview2

1.2.2 Hypothesis: No harmonization through the OECD PE definition3

1.2.3 PE issues not discussed4

1.3 The comparative technique and the study of PE5

1.3.1 The comparative technique in tax-treaty history5

1.3.2 Different approaches to "comparative law"6

1.3.3 The selection of countries7

1.4 Reasons for using a PE rather than a subsidiary: An overview8

1.4.1 Lack of experience in a foreign market8

1.4.2 The mobile petroleum-related industries8

1.4.3 The permanent petroleum-related industry9

1.5 The effect of the presence of a PE: An overview9

1.5.1 The primary effect: Allocation of taxing jurisdiction9

1.5.2 Secondary effects of a PE9

1.6 The terminology of the present work10

1.6.1 The "source state","residence state" and "PE state"10

1.6.2 The PE dictionary10

2 Some constitutive political and economic elements of international society13

2.1 Growth of political independence13

2.2 Increased economic interdependence14

2.3 Qualitative (structural) changes in international business15

2.4 Heterogeneity in the world and homogeneity within groups16

2.5 Recognition of the necessity of international law16

2.6 Summary and conclusions17

3 Theories on allocation of international taxing jurisdiction19

3.1 Introduction19

3.2 The "realistic theory" in legal doctrine20

3.3 Economic versus residential and political allegiance22

3.4 The equivalence theory24

3.5 The faculty theory25

3.6 The neutrality theory26

3.7 The PE principle and inter-nations neutrality29

3.7.1 The basic rule of PE30

3.7.2 The construction clause30

3.7.3 The agency clause31

3.7.4 Conclusion31

4 Main elements in a tax-treaty policy on PE: Basic contradictions33

4.1 Net capital-importing and exporting countries33

4.2 Countries with competitive business sectors versus countries with less competitive business34

4.3 Significant legislative differences35

4.4 Treaties between developed and developing countries36

4.5 Summary37

5 Methodology: Sources of international fiscal law39

5.1 The problem: What are the principles of tax-treaty interpretation?39

5.2 The tax treaty as a source of law40

5.2.1 The primacy of the "ordinary meaning" of the text of the treaty40

5.2.2 The "object and purpose" of the treaty41

5.3 The context of the treaty44

5.3.1 Protocols, observations and reservations44

5.3.2 Mutual agreements44

5.3.3 The commentaries to the OECD model treaties45

a) Overview of the "context approach" versus the "preparatory work approach" and the "treaty approach"45

b) Pro et contra the "context,""preparatory work" and "treaty" approach46

c) Conclusion: A moral or judicial obligation?48

5.3.4 The commentaries to the UN 1980 model convention48

5.4 Definitions in domestic laws49

5.4.1 Overview49

5.4.2 Different meanings in internal laws49

5.4.3 Which state's internal laws?50

a) The law of the residence state50

b) The lex loci option51

c) The lex fori option: Conclusions51

5.4.4 Static or ambulatory (dynamic) interpretation?52

5.5 Custom as a source of tax treaty law55

5.5.1 Domestic court decisions55

5.5.2 Administrative decisions56

5.5.3 Judicial practice concerning domestic laws58

5.5.4 Parallel and deviating treaties60

a) Treaty provisions60

b) Judicial practice concerning parallel treaties61

5.5.5 Supplementary means of interpretation62

a) Preparatory work and the circumstances of the conclusion of the treaty62

b) Theory as a source of law63

6 General historical background: An overview65

6.1 The end of the 19th century: The relative immobility of production factors65

6.2 The present situation: Mobile production factors67

6.3 Restructuring of international law and institutions68

6.4 Summary and conclusion69

7 The history of the concept of PE71

7.1 General71

7.2 1845-1909: PE emerges in Prussian law and the law of the German Empire72

7.3 1899-World War I: PE is adopted in international treaties75

7.4 PE and the re-evaluation of the principle of source-state taxation (1920s-World War II)77

7.4.1 PE in the early post World War I treaties77

7.4.2 The change from source-state to residencestate taxation78

a) The League of Nations’ Group of Economists79

b) The International Chamber of Commerce80

c) The League of Nations’ Group of Technical Experts81

d) Narrowing down of the scope of PE taxation: Dependent and independent agents82

7.4.3 The League of Nations 1927 draft convention82

a) The PE definition of the Committee of Technical Experts82

b) "Affiliated companies" as PE83

c) Little influence of the 1927 draft upon the text of bilateral treaties83

7.4.4 The League of Nations draft conventions 1928-193384

a) Disagreements required new drafts84

b) The PE definition of the 1928 draft conventions: Omission of "affiliated companies" as PE85

c) The League of Nations 1931 multilateral draft conventions85

d) The 1933 draft convention: Adjustments in the PE definition86

7.4.5 The mid and late 1930s: Other issues in focus87

7.5 Bilateral treaties in the 1930s: A PE fiction for construction work87

7.6 Revolution and Contrarevolution: The Mexico and London model conventions (the 1940s)88

7.6.1 The outbreak of the war: The Subcommittee of the League of Nations' Fiscal Committee88

7.6.2 The Mexico 1943 model: The first model treaty for developing countries88

7.6.3 The reaction in London 1946: Reintroduction of the PE principle89

7.6.4 The difference between the business clause of Mexico 1943 and London 194689

a) The Mexico 1943 model89

b) The London 1946 model90

c) The League of Nations arguments pro et contra90

7.6.5 The PE definition of the Mexico and London models91

a) The basic rule of Mexico 1943 and London 194692

b) The agency clause of Mexico 1943 and London 194693

c) For the first time in a model treaty: Construction work may constitute a PE94

d) Another innovation: The "subsidiary clause"94

e) The influence of the Mexico/London models95

7.7 Consolidation of the residence-state principle (1950s-1960s)96

7.7.1 Main impression: Continuity between the League of Nations and the OECD96

7.7.2 PE innovations in the OECD model conventions96

7.8 Re-evaluation of the principle of residence-state taxation (mid-1960s - ?)97

7.8.1 An early signal in 195597

7.8.2 Tax-treaty initiatives by the United Nations from the mid 1960s98

7.8.3 Tax-treaty initiatives in Latin America99

7.8.4 Renewed interest in source-state taxation among OECD members100

7.9 Conclusion101

8 Classification of PE conditions103

8.1 The OECD classification103

8.2 The US classification104

8.3 Recent German classification105

8.4 Swiss doctrine before the Second World War106

8.5 Classification in the present work106

PART TWO: THE BASIC RULE109

A - THE OBJECTIVITY OF THE PE109

9 The taxpayer's physical presence: The "place of business test"111

9.1 Introduction111

9.1.1 The fixed place of business: The "objective presence" in another country111

9.1.2 The place of business: Not subject to business activities112

9.2 A list of examples: The "positive list"113

9.2.1 Prima facie PE113

9.2.2 The primacy of the basic rule114

9.2.3 No interpretation ejusdem generis114

9.2.4 The "place of business" in German doctrine concerning domestic laws and tax-treaty law115

9.3 Branches and places of management115

9.3.1 The branch116

9.3.2 The place of management116

9.4 Natural resources118

9.5 Machinery or equipment as "place of business"?119

9.6 Securities and bank accounts as a "place of business"?121

9.7 Software and patents as a "place of business"?122

9.8 Human beings and animals as a "place of business"?122

9.9 Summary and conclusion123

10 Physical presence at a specific place: The "location test"125

10.1 General125

10.2 Always sufficient for PE status: Fixed location of the center of the activity126

10.3 The peripatetic place of business: Location of the activity within a spatially delimited area?128

10.3.1 The starting point128

10.3.2 Illustrative for the tax-treaty issue: The "spatial-delimitation approach" versus the "base approach" in German domestic laws128

10.3.3 The spatial-delimitation approach for onshore business activities130

a) Norwegian/Danish practice and doctrine130

b) Artistes and theatrical shows: US and New Zealand practice131

aa) The problem131

bb) Performances at one place132

cc) Musical tours etc132

dd) A New Zealand court decision132

c) US:The sole proprietor and the agency clause133

10.3.4 The "location test" and the transportation133

a) International traffic133

b) Domestic transportation134

c) Business activities onboard ships and aircraft136

10.3.5 The spatial delimitation approach for stationary, floating business activities137

a) The problem137

b) The precedence in Norwegian administrative practice138

10.3.6 The "spatial delimitation approach" for ambulatory places of business139

a) The problem139

b) Assignments for several unrelated clients140

aa) Operation of a drilling rig: A UK perspective140

bb) Operation of a drilling rig: A US perspective141

cc) Assignments on drilling rigs142

dd) Summary143

c) Ambulatory activities for the same client143

aa) The Canadian/Norwegian perspective143

bb) The US perspective in US Drilling Rig145

cc) The Danish perspective145

dd) Casuistry: Ambulatory assignments on off shore installation145

10.4 Summary and conclusions: Is there still one "location test" for onshore and offshore business?147

10.4.1 From OECD 1963 to OECD 1977148

10.4.2 Comparison between Creole and Concert Tour148

10.4.3 Market Vendor, the Timber Cases and the drilling cases149

10.4.4 Circus, carnival, etc., compared to drilling activities150

10.4.5 Fishing boats compared to drilling activities150

10.4.6 Main conclusions151

B - THE SUBJECTIVITY OF THE PE153155

11 The right to use the place of business: The "right of use test"155

11.1 General155

11.2 Historical background156

11.3 The problem: A "factual" or a "legal" approach?157

12 The "right of use test" for profit-sharing arrangements159

12.1 Introduction159

12.1.1 The main issue159

12.1.2 Partner or partnership as "enterprise" in the tax treaties?160

a)"Aggregate" versus "entity"approach160

b) No answer in the OECD model160

c) Casuistry161

aa) The UK Court of Appeal's decision in Padmore161

bb) The Canadian Tax Appeal Board in Subway162

cc) The US Tax Court's decision in Unger162

d) Conclusion162

12.2 The partnership as an agency PE?163

12.2.1 Policy163

12.2.2 Agency versus partnership164

a) Acting on behalf of somebody else164

b) Dependence164

c) Profit-sharing165

d) Casuistry and literature165

e) Conclusion166

12.2.3 Management agreements166

12.3 Actual or deemed use of a fixed place of business?167

12.3.1 Policy viewpoints167

12.3.2 General partnerships168

a) Active participation?168

b) A leading case: The US Tax Court's decision in Johnston168

c) A Dutch judicial decision169

d) Positions in the doctrine169

12.3.3 Limited partnerships170

a) General170

b) US judicial practice: Donroy and Unger171

aa) Donroy by the US Tax Court171

bb) Unger171

c) Practice from other countries: Confirmation of the conclusion in Donroy and Unger172

aa) Danish and Norwegian administrative practice172

bb) Dutch judicial practice172

12.3.4 The silent-partner kind of business co-operation173

a)A share of the gross income173

aa) Essence d'Oriente173

bb) A French judicial decision174

cc) Conclusion175

b) Profit-based pensions and retirement reimbursements175

c) Conclusions175

12.3.5 Joint ventures176

a) General176

b) Reasons for using a joint venture176

c) Collective use of one place of business177

aa) A Norwegian administrative case: Engineering177

bb) A Canadian Tax Appeal Board decision: Subway178

d) Is factual use of the place of business required?179

aa) A Greek judicial decision179

bb) A Dutch lower court decision180

cc) PE through "sub-joint ventures"?181

dd) International litigation181

e) Conclusion182

12.3.6 Members of insurance syndicates ("names" and underwriters)182

12.3.7 Trusts and the constitution of PE183

12.3.8 Patronage distributions from co-operatives184

13 The "right of use test" and arm's-length business connections187

13.1 Introduction187

13.2 Joint-venture-like co-operation with a client187

13.2.1 German domestic laws187

a) The traditional view187

b) An alternative approach: Football Trainer188

13.2.2 Tax-treaty law188

a) Long-term use of the client's premises188

b) Occasional use under contractual obligations189

aa) The German Supreme Court: Consultancy1990189

bb) The Norwegian lower court: Pegrum190

cc) Conclusion191

13.3 Leasing and franchising of business assets and business facilities191

13.3.1 Leasing of business assets191

13.3.2 Leasing of business enterprises192

a) German decisions concerning domestic laws192

b) The Danish decision in Mink Farm - taxtreaty law192

13.3.3 The "right of use test" under franchising agreements193

13.3.4 Bareboat versus time charter194

13.3.5 Gaming and vending machines194

13.4 Use of facilities belonging to other business connections195

13.4.1 Facilities belonging to advisers195

13.4.2 The use of the facilities of customers195

13.5 The performance of auxiliary activities196

13.5.1 German domestic laws and auxiliary activities196

a) Control activities create a PE?196

b) Reconsidering the rationale of Leasing: Insurance 1962197

13.5.2 Tax-treaty law197

a) Control of contractual obligations197

b) The use of facilities for auxiliary business activities198

14 Indirect evidence of a right of use to a place of business201

14.1 Commercial activities in dwellings and home offices201

14.1.1 German domestic laws201

14.1.2 Tax-treaty law202

a) Business activities in dwellings202

b) Home offices203

c) Agents and dwellings under the basic rule203

d) Conclusion204

14.2 Hotel rooms and the "right of use test"204

14.3 Employees'use of employer’s facilities205

14.4 Other possible evidence of a right of use to a place of business?206

14.4.1 Stationery, letterheads, firm signs, bank accounts,etc206

14.4.2 Ownership and sales of merchandise207

15 The duration of the right to use the place of business: The"permanence test"209

15.1 General209

15.1.1 The "permanence test" and other PE conditions209

15.1.2 Permanent versus temporary use of the place of business210

15.2 Analogy from the time threshold for construction PE?210

15.2.1 The question of analogy de lege ferenda211

15.2.2 Analogy in German domestic laws212

15.2.3 The question of analogy de lege lata214

a) The analogy for "construction-like" business activities214

b) The analogy for "non-construction-like" activities215

15.2.4 Conclusion216

15.3 Criteria for the "permanence test"217

15.3.1 Intended permanence as a basis for "permanence"217

15.3.2 The place of business and the business activity as the basis for "permanence"217

15.3.3 The duration of the business activity as the basis for "permanence"218

a) The "look-forward rule"218

b) The "look-back recharacterization rule"218

15.3.4 Sufficient duration of a "permanent" place of business219

a) An "18-month" or a "two-year rule"?219

b) What amount of time is never sufficient?220

15.3.5 Calculation of the duration of the business activity222

a) The start of the "duration test"222

b) The end of the "duration test"223

15.3.6 The significance of reiteration and interruption224

a) Reiteration as a basis for "permanence"224

b) Interrupted work periods225

15.3.7 Conclusions225

C- THE FUNCTIONALITY OF THE PE227

16 Introduction229

16.1 The four aspects of the "business activity test"229

16.2 Inconsistent terminology230

16.3 Treaties without a general definition of the basic rule230

17 Business activities excluded in the treaties233

17.1 International shipping and air transport233

17.1.1 Introduction233

a) International shipping and air traffic under the OECD model treaty233

b) Deviating tax-treaty practice233

c) The UN model treaty234

d) Inland waterways traffic234

17.1.2 Place of effective management234

17.1.3 Issues under the "business activity test" of art. 8236

a) Operation of vessels in international waters236

aa) Time charter versus bareboat charter236

bb) Drilling activities237

cc) Supply activities239

dd) Oceanographic surveys239

ee) Fishing, dredging and hauling239

b) International traffic as distinguished from inland waterways traffic240

c) International transportation and connected business activities240

aa) Tickets, ground transportation, airport hotels,etc240

bb) Public relation activities241

cc) Containers241

d) Dividends, interest and other passive investment income242

17.2 Agriculture, forestry, and fishing242

18 The domestic-law aspect: Income-generating activities distin-guished from "business" in the treaties245

18.1 The significance of domestic laws245

18.1.1 The US concept of "trade or business"246

18.1.2 German domestic laws: Gewerbebetrieb248

18.1.3 Norwegian domestic laws: Virksomhet249

18.1.4 The main issues in the proceeding discussion250

18.2 Management and maintenance of real estate versus business operations251

18.2.1 General251

a) Rental income in Belgian judicial practice252

b) Canadian judicial practice concerning rental income252

c) Parceling of real estate in lots: A Danish perspective253

18.2.2 The "business activity test" in US judicial decisions concerning management of real estate253

a) An early non-treaty decision: Pinchot254

b) Confirming a PE: The Tax Court's decision in Lewenhaupt254

c) Denying a PE: The decisions in Amodio and Herbert255

aa) Confirming a "trade or business"： Amodio255

bb) Denying a "trade or business"： Herbert256

d) Conclusion: A wide tax-treaty concept of "busi-ness"257

18.2.3 German law: The "business activity test" and rental income from real property257

a) The "business" concept of the general Income Tax Act257

b) The "business activity test" in the domestic PE definition258

18.2.4 Norwegian domestic laws: Rental income as business profits?259

18.3 Management of securities260

18.3.1 Introduction260

18.3.2 Investment in securities and the US "trade or business" concept261

a)"Business activity" for investment corporations?262

b) Personal investment activities262

aa) Investment income as "trade or business"262

bb) The "trade or business" concept regarding expenses263

c) Investment activities by trusts as "trade or business"?264

d) Conclusion264

18.3.3 German law and trading in securities265

18.3.4 Norwegian law265

18.4 Management of licenses: Royalty income267

18.4.1 Royalties and the concept of "trade or business" in US domestic laws268

18.4.2 German domestic laws and the term "royalty"270

18.4.3 Norwegian domestic laws and the term "royalty"270

a) Deutsche Werft270

b) Essence d'Oriente271

c) Aga-Baltic271

d) Conclusion272

18.5 Personal services272

18.5.1 Independent personal services: "Liberal professions"273

a) The "fixed base" of an independent professional273

b) The "183-day test"273

c) Business activity versus "liberal profession"274

d) Conclusion275

18.5.2 Dependent personal services275

18.6 Summary and main conclusions276

19 Core business activity or auxiliary or preparatory activities? The tax-treaty aspect of the concept of "business"279

19.1 Overview279

19.1.1 The catch-all term of the OECD-based "negative list"279

19.1.2 Auxiliary and preparatory activities280

19.1.3 A non-OECD-based case: Iron Ore281

19.2 Background in older tax treaties281

19.2.1 The "productive clause"281

19.2.2 The "profitable criterion"283

19.3 The OECD alternative "essential and significant" activities283

19.3.1 The starting point: The general purpose of the enterprise?284

a) An example: Invoicing and collecting leasing charges284

b) Patents, know-how and copyrights285

c) Banking285

aa) Swiss judicial practice286

bb) US administrative practice286

cc) Norwegian administrative practice287

d) Conclusion287

19.3.2 The relative importance of the activity: The quantitative aspect288

a) General288

b) OECD-based treaties288

c) A special case: LKAB289

d) Conclusion290

19.3.3 Combination of activities: The "cumulation clause"290

a) A pre-OECD position290

aa) De lege lata: The OECD alternative290

bb) Other alternatives de lege ferenda291

b) Combination of auxiliary with core business activities292

aa) OECD-based treaties292

bb) Pre-OECD treaties292

cc) Purchasing activities: "Strong" and "weak"excepted activities293

dd) Conclusion293

c) Combination of auxiliary with other auxiliary activities294

aa) German domestic laws in Export Agent294

bb) Tax-treaty law294

cc) Conclusion295

d) Combination of auxiliary activities and independent agents296

e) The "cumulation clause" in treaties with developing countries297

aa) The UN model convention297

bb) Norwegian tax-treaty practice: Reintroduc-tion of the "force of attraction principle"?297

19.4 Categories of core business activities299

19.4.1 General: Exploitation, manufacturing and sales activities299

a) Pre-sales activities299

b) Post-sales activities300

19.4.2 Management301

a) General: The "place of management"301

b) Regional places of management301

c) Fractions of management302

aa) Supervision and coordination302

bb) Accounting and budgeting302

cc) Other supervisory activities303

dd) Management services versus consultancy services and technical services304

ee) Payment routines, nomination of board member, etc305

ff) Letterbox and simple paperwork305

gg) Shore bases for offshore drilling activities305

19.4.3 Transportation306

19.4.4 Leasing306

19.5 Categories of auxiliary business activities307

19.5.1 Research and development307

a) General307

b) Research as distinguished from quality control307

c) Research and development for other enterprises308

d) Research and development as joint venture308

19.5.2 Advertising and public relation309

19.5.3 Collecting information310

a) Agencies for newspapers and broadcasting corporations311

aa) News bureaux versus editorial offices311

bb) Broadcasting stations312

b) Market information312

c) Credit reports313

19.5.4 Purchase of stocks of goods and merchandise313

a) General313

b) Purchasing activities in domestic laws314

c) Activities related to purchasing activities314

d) Purchasing solely for the enterprise's own purposes abroad?315

e) Purchasing for related companies315

f) Purchasing activities and the "arm's length prin-ciple"316

19.5.5 Storage, display, processing and delivery of stocks of goods and merchandise317

a) General storage and display317

aa) Storing for third parties?317

bb) Bonded warehouse318

cc) Consignment stocks318

dd) Exception for the use of facilities or for the activity of storing,displaying, or delivering?319

b) Storage for processing abroad319

c) Storage for delivery of stocks of goods and merchandise320

aa) The "delivery exception" in the OECD model treaty320

bb) Omission of the "delivery exception"： Recourse to the basic rule321

cc) Omission of the "delivery clause" in the UN model treaty322

19.5.6 Other auxiliary business activities322

a) Invoicing and collection of claims323

b) Handling of customs,etc323

c) "After-business activities"323

d) Recreational activities324

19.5.7 Conclusions: No general principle?324

20 The connection between the business and the place of business: The "business connection test"327

20.1 Introduction327

20.1.1 Business performed "through" a fixed place of business327

20.1.2 Whose "business" activity is conducted through the place of business?328

20.2 The "attraction approach"： A place of business serving core business activities within the same jurisdiction328

20.2.1 Agents without pricing authority329

20.2.2 The Dutch Supreme Court’s decision in Street Market330

20.2.3 Truck driver’s parking lot Timber 1982330

20.2.4 Storage of equipment: Alaska and Creole331

a) Alaska331

b) Creole331

20.2.5 Onshore bases for offshore activities332

20.2.6 Conclusion333

20.3 A place of business supporting a core business activity outside the jurisdiction of the treaty333

20.3.1 Hiring-out of labor333

20.3.2 PE taxation of transportation through pipelines under the basic rule334

20.4 The "force of attraction principle" of the UN model treaty335

20.4.1 Options for extension of source-state taxation of business profits335

20.4.2 The "force of attraction principle" in the UN model treaty336

a) The text336

b) The policy behind the "force of attraction principle"336

c) The relationship between "sales" (litra b) and "other business activities" (litra c)337

20.4.3 The "force of attraction provision" as an identification clause338

a) "Force of attraction" and the independent agent338

b)"Force of attraction" and construction338

aa) Construction activities and "similar" activities339

bb) Simultaneous and subsequent construction339

20.4.4 Circumvention of the UN "force of attraction principle"339

PART THREE: CONSTRUCTION WORK343

21 Introduction: The construction clause and its relationship to the basic rule343

21.1 General343

21.2 Tax treaties with a construction clause344

21.2.1 Construction tasks are impermanent344

21.2.2 A specific "location test" for the construction clause?345

21.2.3 One project makes one PE: Objective identification345

21.2.4 General contractor and subcontractor: Subjective identification346

21.3 Tax treaties without a construction clause347

21.3.1 Historical background - from the "nature" to the "duration" of the activity347

21.3.2 Application of the basic-rule "permanence test"349

a) Treaties between developed countries349

b) Treaties between developed and developing countries: The case of DTA Norway-UK 1951349

aa) A constitutional argument in the case of Norway350

bb) The time limit for construction tasks under the basic rule350

c) Construction PE under DTA USA-Canada 1942?351

21.4 Conclusions351

22 The objectivity of the construction PE: Identification353

22.1 The "place of business test" under the construction clause353

22.2 Identification of construction projects: Preliminary issues354

22.2.1 The problem: One or several business operations?354

22.2.2 Policy issues with regard to identification355

a) Efficiency of PE taxation: Protection of the tax base355

b) Predictability356

c) Administrative convenience357

22.2.3 Identification also of simultaneous projects?357

22.2.4 Identification among related companies?358

22.3 Conditions for identification359

22.3.1 Overview: Projects constituting a coherent whole359

a) OECD-based tax-treaty law359

b) The Belgian/German/Dutch identification agreement: Unity of execution360

c) Identification in German domestic laws361

22.3.2 Commercial unity as a condition for identification363

a) Introduction363

aa) The same contract363

bb) Interruptions between contracts364

cc) Contracts signed at the same time364

dd) The significance of the same invoice364

b) Identical clients as a condition for identification364

aa) Policy issues364

bb) Is an identical client presupposed in the OECD-based treaties?365

cc) Casuistry: Some judicial and administrative decisions365

dd) Discussion and conclusion367

c) The "constructional entity" as condition for identification367

aa) Policy368

bb) The mutual agreement in Petrochemical Plant368

cc) Simultaneous construction tasks368

dd) Conclusion369

d) The time factor: The "continuous presence test"369

aa) The "continuous presence test" and the construction clause369

bb) The "continuous presence test" and the basic rule371

e) Identical technical aspects as a condition for identification372

22.3.3 Geographical connection373

a) OECD-based treaties373

b) The US perspective: Geographical "interdependence"376

22.3.4 Conclusions: No accumulation of commercial and geographical conditions378

22.4 The multilateral Nordic treaties: From specific provisions back to the OECD approach379

23 The subjectivity of the construction PE: The "duration test"381

23.1 Overview: 12-month, 6-month or 30-day duration?381

23.1.1 The OECD "12-month test"381

23.1.2 The UN "6-month test"382

23.1.3 The British/Norwegian "30-day test within a 12-month period"383

23.1.4 The "6-month test" in German domestic laws383

23.1.5 Reasons for shorter "duration tests"383

23.2 The start of the "duration test"384

23.3 The termination of the construction project385

23.4 Interruptions during the construction period386

23.4.1 Possible solutions de lege ferenda386

a) Final termination: Triggering of a new time limit386

b) Suspension of the time limit387

c) Inclusion of interruptions in working time387

23.4.2 German domestic laws387

23.4.3 The impact of interruptions de lege lata388

a) The starting point388

b) Expected (normal) interruptions389

c) Unexpected (extraordinary) interruptions389

d) Intentional interruptions389

e) Commercial versus non-commercial interruptions389

f) Summary390

24 The functionality of the construction PE: The "business activity test"391

24.1 Introduction: The problems391

24.1.1 The significance of the "business activity test" for construction PE391

24.1.2 Pre-, post-, and simultaneous construction-related activities391

24.1.3 Intellectual activities392

24.1.4 Construction activities under the UN model treaty392

24.2 The main issue: The "constructional" or "functional" aspect of the project?393

24.2.1 The point of departure: Broad or strict interpretation?393

24.2.2 A German perspective: Domestic laws393

24.2.3 Maintenance and repair work394

a) The starting point394

b) No answer in the OECD commentaries394

c) German domestic laws: Casuistry395

d) Tax-treaty law de lege lata: Belgian and Norwegian/Danish repair cases396

e) Conclusion397

24.2.4 Installation work397

a) German domestic laws397

b) Tax-treaty law399

24.2.5 Construction work or business activities preceding construction?400

a) Scaffolding work400

b) The erection of barracks401

c) Demolition, excavation and dredging402

aa) German domestic laws402

bb) Tax-treaty law403

24.2.6 Drilling of oil wells as "construction work"403

24.3 Physical or "intellectual" parts of the construction work: Planning and supervision405

24.3.1 Introduction405

24.3.2 German domestic laws406

24.3.3 Intellectual activities under OECD-based tax treaties407

a) OECD commentaries: Only intellectual activities pertaining to physical work407

b) Planning and supervision of construction work408

aa) Planning and management by the general contractor408

bb) Supervision without responsibility for physical work409

cc) Sub-subcontracting of the physical work410

c) Quality control of construction work410

aa) Technical quality control411

bb) Quality control of a managerial nature411

d) Summary and conclusion412

24.3.4 Intellectual activities in UN-based tax treaties412

24.3.5 Two non-model-based treaties413

a) A US perspective concerning DTA USA-Canada 1942413

b) The DTA Nordic States 1989414

24.4 Construction work for an enterprise's own purposes414

PART FOUR: OFFSHORE BUSINESS ACTIVITIES419

25 Introduction419

25.1 The main issues419

25.1.1 Mobile versus stationary offshore business activities419

25.1.2 OECD discussions: No solution420

25.1.3 Bilateral practice: PE fictions420

25.2 A brief historical outline421

25.2.1 The history of offshore petroleum activities421

25.2.2 Extension of internal taxing jurisdiction during the 1960s and 1970s422

26 Outline of offshore PE fictions425

26.1 Introduction425

26.2 The US alternative: PE taxation under the "drilling rig clause"426

26.2.2 Historical outline of the "drilling rig clause"426

26.2.2 A "duration test" for offshore drilling427

26.3 The British/Norwegian alternative: Source-state taxation428

26.3.1 Historical outline429

26.3.2 The "fixed place of business test" is abandoned430

26.3.3 The "right of use test" and the "business connection test" are abandoned431

26.3.4 The "business activity test" is retained432

26.3.5 The relationship of the offshore clause to the basic rule432

26.3.6 A brief comparison of the offshore clause with the Mexico and Andean treaties433

27 Offshore identification provisions in the tax treaties between Norway and the US, the UK, France, and the Nordic states435

27.1 General435

27.2 Overview of some bilateral offshore identification provisions435

27.3 Identification when all assignments are performed offshore437

27.3.1 Substantially identical activities437

a) Geographical identification under the offshore clause?437

b) Commercial identification?437

c) Summary439

27.3.2 Identification of simultaneous projects too?439

27.3.3 Which enterprise is subject to identification?440

27.4 Identification of offshore and onshore assignments441

27.4.1 Treaties with an offshore clause441

27.4.2 Treaties which do not cover the continental shelf442

28 The "business activity test" of the offshore clause445

28.1 Overview445

28.2 The geographical criterion: Offshore activities445

28.2.1 The inner or outer borders445

28.2.2 The "water’s edge approach"： Norwegian Diving446

28.2.3 A linguistic interpretation of the term"offshore"447

28.2.4 "Offshore"： Outside the territorial waters, or outside the baselines under international law?448

a) Outside the territorial waters?448

b) Outside the baselines?449

28.2.5 Conclusion449

28.3 The functional criterion: Exploration and exploitation of natural resources450

28.3.1 Petroleum versus other natural resources450

28.3.2 Transportation of supplies: The "supplyship excepti- on"451

a) Vessels engaged in transportation of personnel and goods451

b) The UK "primary designed function test"452

c) The term "other auxiliary vessels" under the 1989 Nordic treaty454

aa) Other transportation vessels?454

bb) Diving vessels454

cc) Oceanographic surveys455

d) The "supply-ship clause" versus the "international transportation clause" in DTA Nor-way-USA 1971456

e) The US "drilling rig clause" and oceanographic surveys456

28.3.3 Transportation under the offshore clause457

a) Passage over the continental shelf457

b) Transportation of petroleum from production platforms457

28.4 Brief survey of special treaties concerning the North Sea458

28.4.1 Transportation of petroleum from the Norwegian continental shelf to the UK and Germany458

a) Abandonment of the PE principle458

b) The Ekofisk treaty between Norway and Germany459

c) The Frigg treaty between Norway and the UK459

28.4.2 Taxing jurisdiction over profits from extraction of petroleum from transmedian line oil and gas fields459

28.5 Final observations460

PART FIVE: AGENCIES463

29 Introduction463

29.1 Preliminary remarks463

29.2 Overview of the agency clause464

29.2.1 The objectivity of the agency PE464

29.2.2 The subjectivity of the agency PE465

29.2.3 The functionality of the agency PE466

29.3 The basic rule as an alternative to the agency clause466

29.3.1 The principal has a fixed place of business467

29.3.2 The agency clause and the basic-rule "permanence test" and "business activity test"468

29.3.3 Conclusion469

29.4 The proceeding discussion470

30 Main trends in the development of the agency clause471

30.1 The agency clause in German domestic laws471

30.1.1 From the 1890s through 1934471

30.1.2 Agency as PE in 1934: § 16 StAnpG472

30.1.3 Separation of PE and agency PE: § 13 AO472

30.2 Tax-treaty law: Early issues (until the end of the 1920s)473

30.2.1 The agency clause and the "fixed place of business test"473

30.2.2 Partners as agents?474

30.2.3 The "independent agent clause"474

a) Historical roots in UK domestic laws474

b) Adoption in the 1927 model treaty of the League of Nations475

30.3 Criteria for agency PE under the later model treaties of the League of Nations (1929-1946)476

30.3.1 Four rejected criteria476

30.3.2 The League of Nations three alternative conditions for agency PE477

a) The 1929 report477

b) The 1930 report477

c) Combined efforts by the International Chamber of Commerce and the League of Nations478

d) The influence upon bilateral treaties479

31 The agent and the authorization: The objectivity of the agency PE481

31.1 Introduction481

31.2 The agent481

31.2.1 Personal representation?482

31.2.2 Several agents: One PE?483

31.2.3 The agent's connection to the territory of the state484

a) The problem484

b) German domestic laws484

c) OECD-based treaties485

d) Issues under the UN model treaty485

e) Activities performed onboard ships486

31.2.4 The sole proprietor as "agent" for himself?486

31.3 Commission or operations under one's own name ?487

31.4 The signing of the contracts489

31.4.1 The persons signing the contracts489

31.4.2 The place where the contract is signed489

31.5 Authorization as qualification for an agency PE490

31.5.1 Introduction490

31.5.2 The legal basis of the agency PE490

31.5.3 The distinction between soliciting, negotiating and concluding contracts491

a) Soliciting and negotiating contracts are insufficient491

b) De lege ferenda: Should negotiations be enough?492

aa) Lack of neutrality492

bb) Administrative convenience492

cc) German domestic laws493

dd) Conclusion493

c) Both negotiate and conclude contracts?494

d) Limitations on authority495

aa) Power to instruct as qualification of the agency495

bb) Fixed conditions: No agency?496

e) General or limited authorization?497

31.5.4"Internal" or "external" authorization?498

a) Problem and terminology498

b) No solution in the OECD commentaries499

c) Practice and doctrine in some countries499

aa) US commentators and practice499

bb) The German position500

cc) Pseudo-authorization: A case by a Dutch lower court501

dd) Norwegian commentators501

d) Conclusion502

32 "Legal" or "commercial" dependence: The subjectivity of the agency PE503

32.1 Introduction503

32.1.1 Overview of the "dependence test"503

32.1.2 Agency PE through employees504

32.1.3 The "broker" and the "general commission agent"505

32.1.4 Inconsistency in the model treaty commentaries?506

32.1.5 The historical roots in early German domestic laws: "Commercial" versus "social" dependence507

32.2 Merging of business interests: Criteria for dependency under the agency clause508

32.2.1 The OECD commentaries as starting point508

32.2.2 The German Supreme Court on domestic laws: "Objective" versus "personal" dependence"508

32.2.3 Tax-treaty law: Power to instruct versus the agent's discretionary power of attorney — casuistry510

a) The German Supreme Court: Insurance 1975510

b) The South African Supreme Court decision: Downing510

c) A Norwegian administrative ruling: Magnesium511

32.2.4 Other evidence of merging of business interests512

a) The principal's support of the agent's activities512

b) The principal's sanctions and control512

c) The number of clients512

d) Sharing of entrepreneurial risks513

32.2.5 Summary and conclusions513

33 Deemed dependency: The "ordinary course of business test"515

33.1 Introduction515

33.2 Typical of the enterprise: Or typical of the industry?516

33.2.1 Casuistry517

a) The German Supreme Court: Insurance 1975517

b) Dutch court practice517

c) The UK High Court decision in Fleming and London Produce Co. Ltd518

d) A Belgian Supreme Court decision518

33.2.2 Conclusion519

33.3 Recourse to the "dependence test"519

33.3.1 The problem519

33.3.2 A German Supreme Court decision: Container519

a) The facts519

b) The contentions of the parties520

c) The lower tax court's decision520

d) The Supreme Court's decision520

33.4 Summary521

34 The functionality of the agency PE523

34.1 The business concept under the agency clause523

34.1.1 The domestic-law aspect523

34.1.2 The tax-treaty aspect523

34.1.3 A different approach: German domestic laws524

34.2 The "habitual exercise test"525

34.2.1 General525

34.2.2 Regularity versus permanence525

34.2.3 Individual judgement: Few general criteria for regularity526

34.2.4 Agency PE for consultancy services and construction work?526

34.2.5 Conclusions527

35 UN model treaty deviations from the OECD agency clause529

35.1 Overview529

35.2 The "stock of goods test" for agency PE529

35.2.1 Historical background529

35.2.2 Only stocks for delivery530

35.3 The "single principal test"531

35.3.1 Overview531

35.3.2 No written agreement?531

35.3.3 Influence upon some Norwegian tax treaties531

35.4 The UN provisions concerning insurance agents532

35.4.1 Overview of policy issues532

a) The effect of the "dependence test"533

b) The effect of missing authority533

c) Discussions in the UN model treaty commentaries533

d) Insurance agents and the "single principal test"534

35.4.2 Overview of the "insurance of risks test" and "col-lection of premiums test"534

35.4.3 The conflict between the "collection of premiums test" and the "insurance of risks test"535

PART SIX: SUBSIDIARY AS PE539

36 PE through related corporations539

36.1 Introduction539

36.2 Treaty-based protection of controlled companies540

36.2.1 General540

36.2.2 Historical background540

36.2.3 Policy considerations541

36.3 Conditions for subsidiary PE542

36.3.1 The objectivity of the subsidiary PE542

a) The basic542

b) The agency clause542

36.3.2 The subjectivity of the subsidiary PE542

a) The basic rule542

b) The agency clause543

36.3.3 The functionality of the subsidiary PE543

a) Alter ego companies: Extensive business co-oper-ation544

b) US domestic laws: The National Carbide and Bollinger criteria545

aa) The National Carbide criteria545

bb) The Bollinger criteria546

cc) Relationship to tax-treaty law547

c) Horizontal and vertical integration547

d) Subsidiary and branch with parallel activities547

36.3.4 Subsidiary PE through "empty" companies?548

a) The problem548

b) Casuistry: "Pass-through agreements" and subcontracting549

aa) Danish Diving549

bb) The Norwegian decision in Hereema (appealed)549

cc) Participation in the same construction project550

dd) Second Belgian/Dutch Identification551

ee) Danish/Norwegian Subsidiary PE552

ff) Letterbox companies as the principal?552

36.4 Summary and conclusions: Pressure on the PE concept as an alternative to unitary taxation?553

PART SEVEN: SUMMARY AND CONCLUSIONS557

37 Summary and conclusions557

37.1 De lege ferenda: Background and policy issues557

37.1.1 Two main structural changes in the international community557

37.1.2 Categories of OECD member countries557

a) Resource states versus know-how states558

b) Competitive versus less competitive national industries558

37.1.3 A change in the effect upon source-state taxation559

37.1.4 Infringement of the equivalence principle559

37.1.5 Lack of neutrality560

37.2 De lege lata:Summary of conditions for PE560

37.2.1 The objective conditions for PE561

a) The "place of business test"561

aa) Substantial physical objects that serve a business activity561

bb) Deviations in recent PE fictions561

cc) Possible developments in the future561

b) The "location test"： Continuous presence within a delimited area?562

aa) Towards a "continuous presence test"562

bb) The construction site as a "fixed place ofbusiness"563

c) Abandonment of the "location test"： The British/ Norwegian offshore clause563

d) The personal connection564

37.2.2 The subjective condition for PE564

a) The "right of use test"564

b) Profit-sharing arrangements565

c) Arm's-length business operations566

d) The "permanence test"： A "duration test" of relative importance566

e)The "dependence test"： The agency clause567

f)The "subsidiary PE"567

37.2.3 The functional conditions for PE567

a)The domestic-law aspect: The concept of "busi-ness" differs568

b)The tax-treaty aspect: The "negative list"568

c)The construction clause and the concept of "business"568

d)"Business" under the British/Norwegian offshore clause569

e)The renvoi clause may cause double taxation569

f)The "business connection test"569

g)The "habitual exercise test":The agency clause570

37.2.4 Future trends570

37.3 Conclusion: Erosion of the PE principle571

37.3.1 From "harmonization" to "dis-harmonization" of tax-treaty law?571

37.3.2 Dilution through case law572

37.4 Abandon the "fixed place of business test"?573

Bibliography577

Table of cases589

Official documents603

Index607