handbook-tb

Adolfo Martín Jimenézto avoid having a PE may be challenged. It does not seem to be the case,however, because the main pillars of the PE concept and its evolution arealso accepted in the context of the United Nations Model Convention,and, as such, this includes the principle of legal independence and separateconsideration of PEs of companies within a group.Therefore, despite the fact that the United Nations ModelConvention clearly leans towards more recognition of source-countryrights, and in this regard may reduce vulnerability of source countriesto artificial avoidance of PE status, it has inherent limitations, in linewith the OECD Model Convention. These also make it susceptible to theeffects of the most common strategies of fragmentation/commissionairelikeagreements of company groups aimed at avoiding the presenceof a PE in the source State. As a consequence, an effective strategy tocounteract these types of behaviours should be considered also by thosecountries which use the United Nations Model Convention. Additionally,it is easy to avoid having a PE in the context of business models that donot use contrived or abusive structures and simply do not need muchpresence within the source State, but can still conduct relevant businessactivity within its borders. If States want to tax these activities, they mayneed to reconsider their strategies and tax treaty policies, because the PEconcept will not help them much in this regard.5. Strategies against (artificial) avoidance of PE status5.1 IntroductionThe most relevant issue for developing countries is likely how toidentify a PE, and how to attribute profits to it, rather than developsophisticated methods to counteract the most challenging tax avoidancestrategies. Therefore, in any critical review of the possible routesthat can be proposed for developing countries, special importance isattached to administrative concerns: theoretical solutions that are difficultto implement or enforce should be discarded. The term “difficult”is clearly relative and the correct strategy will ultimately depend on thespecific situation of individual countries. As explained above, the preferredOECD solution for putting an end to PE tax planning appears tobe the application of anti-avoidance rules or doctrines and/or transfer380