OECD: Attribution of profits to PE | KPMG | GLOBAL
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OECD: Attribution of profits to permanent establishments (BEPS Action 7)

OECD: Attribution of profits to PE

The Organisation for Economic Cooperation and Development (OECD) today released a report as additional guidance on the attribution of profits to a permanent establishment. The OECD report was issued pursuant to Action 7 of the base erosion and profit shifting (BEPS) project.


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Read the OECD report—Additional Guidance on the Attribution of Profits to Permanent Establishments (BEPS Action 7).


As noted in today’s OECD release, a report issued in 2015 under BEPS Action 7 recommended changes to the definition of permanent establishment (PE) in Article 5 of the OECD Model Tax Convention, specifically concerning whether a non-resident enterprise must pay income tax in another country. In particular, the BEPS Action 7 report recommended changes aimed at preventing the use of certain common tax avoidance strategies used to circumvent the existing PE definition. The OECD report also called for the development of additional guidance on how the existing rules on attribution of profits to PEs under Article 7 would apply to PEs resulting from the recommended changers (in particular for PEs outside the financial sector), taking into account the revised guidance contained in the report on aligning transfer pricing outcomes with value creation (Actions 8-10 Report, OECD 2015). 

The additional guidance released today:

  • Sets out high-level general principles for attributing profits to PEs in accordance with applicable treaty provisions
  • Provides examples on the attribution of profits to certain types of PEs arising from the changes to the PE definition under BEPS Action 7

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