handbook-tb

Preventing avoidance of permanent establishment status4. United Nations Model Convention and (artificial)avoidance of PE status4.1 Differences between the United Nations and OECDModel ConventionsThe differences between the United Nations and OECD ModelConventions regarding the PE concept are well known, and the presentchapter will mention them only very briefly:‣ ¾ Article 5 (3) of the United Nations Model Convention has twoparagraphs: 87■■■■Article 5 (3) (a) of the United Nations Model Convention isbroader than Article 5 (3) of the OECD Model Conventionas it covers assembly projects and supervisory activities— even if a similar interpretation of Article 5 (3) of theOECD Model Convention is suggested by the Commentaryon Article 5 — and the time limit for a PE to exist is shorter,6 months instead of 12.Article 5 (3) (b) of the United Nations Model Conventionpermits the source State to tax the provision of services in itsterritory, provided they refer to a project or connected projectslasting for a period or periods aggregating more than183 days in any 12-month period commencing or endingin the year concerned (a similar provision is included as analternative in paragraphs 42.11-42.48 of the Commentaryon Article 5 of the OECD Model Convention).A controversial issue, however, is whether the geographical andcommercial coherence requirements apply to projects underboth subparagraphs (a) and (b) of Article 5 (3) of the UnitedNations Model Convention. Paragraph 11 of the Commentary87See B. Arnold, “Commentary on Article 5 of the OECD Model Convention,”in IBFD, Global Tax Treaty Commentaries, supra note 12, at 36, whereit is pointed out that there is a much stronger argument in favour of Article5 (3) (a) of the United Nations Model Convention being a deeming provision(that is to say, it does not have to meet Article 5 (1) requirements) than Article5 (3) of the OECD Model Convention.371