handbook-tb

Preventing avoidance of permanent establishment status‣ ¾ Some business models do not need physical presence in a country,and this does not involve any type of avoidance or aggressiveplanning. This is especially the case with mobile businesses,services, technological enterprises and the digital economy. 50Simply put, in these cases the fixed place of business may not berelevant to capturing profits in the source State; 51‣ ¾ The separate consideration of various fixed places of business/projects of the same taxpayer could allow for the PE threshold tobe easily avoided. It may even be said that this principle, whichaffects Article 5 (1) and (3) of the OECD Model Conventionequally, encourages tax avoidance in the State of source. Theseparate consideration of the activities of different companies,even if within the same group or for the same project or lineof business, also increases the possibilities of avoiding the PEthreshold; 52‣ ¾ The connection between the fixed place of business and the carryingon of business could be severed by conducting businessat places that, in theory, may not be considered to be availableto or at the disposal of the non-resident taxpayer: for example,hotels, homes of employees, premises of clients. Certain elementsof artificiality — attempts to avoid PEs — might be presentin some models, however. This also affects the permanencetest of the PE concept, as it is very easy for some businesses tohave short-term or intermittent presences in a country withoutbeing continuously in the same location (for example, rental of50The subject of the digital economy is not covered under the presentchapter and is dealt with in chapter VIII, Protecting the tax base in the digitaleconomy, by Jinyan Li. See also T. Falcao and B. Michel, “Assessing theTax Challenges of the Digital Economy: An Eye-Opening Case Study,” (2014)Vol. 42, No. 5 Intertax, 317 ff.51See W. Hellerstein, “Jurisdiction to Tax in the Digital Economy: Permanentand Other Establishments,” (2014) Vol. 68, No. 6 Bulletin for InternationalTaxation, 346 ff., where it is argued that the virtual PE may not bea solution either.52See B. Arnold, “Threshold Requirements for Taxing Business ProfitsUnder Tax Treaties,” supra note 49, at 81; and R. Vann, “Taxing InternationalBusiness Income: Hard-Boiled Wonderland and the End of the World,” supranote 12, at 319.353