handbook-tb

Preventing avoidance of permanent establishment statusCommentary on Article 5 (4) of the United Nations ModelConvention, explains that “[t]he deletion of the word ‘delivery’reflects the majority view of the Committee that a ‘warehouse’used for that purpose should, if the requirements of paragraph 1are met, be a permanent establishment.” It would seem, however,that the United Nations Committee of Experts on InternationalCooperation in Tax Matters (United Nations Committee ofExperts) acknowledges that little income can be attributed tothis activity; 90‣ ¾ Article 5 (5) of the United Nations Model Convention covers,in addition to the normal dependent agency PE, a person nothaving authority to conclude contracts but habitually maintaining(in a contracting State) a stock of goods or merchandise fromwhich he regularly delivers goods or merchandise on behalf ofan enterprise of the other contracting State. There seems tobe some intent to challenge commissionaire agreements withthis provision where the Commentary observes that: “Somecountries believe that a narrow formula [on Article 5 (5)] mightencourage an agent who was in fact dependent to representhimself as acting on his own behalf.” It is interesting to notethat the Commentary on Article 5 (5) of the United NationsModel Convention still reflects that the former United NationsAd Hoc Group of Experts on International Cooperation in TaxMatters, with regard to the 1999 version of the United NationsModel Convention, noted that: (a) “if all the sales-related activitiestake place outside the host State and only delivery, by anagent, takes place there, such a situation would not lead to apermanent establishment”; and (b) “if sales-related activities(for example, advertising or promotion) are also conductedin that State on behalf of the resident (whether or not by theenterprise itself or by its dependent agents) and have contributedto the sale of goods or merchandise, a permanent establishmentmay exist.” 91 The independent agent of Article 5 (7) ofthe United Nations Model Convention may be interpreted as an90See paragraph 21 of the Commentary on Article 5 of the UnitedNations Model Convention.91See paragraph 26 of the Commentary on Article 5 of the UnitedNations Model Convention.373