handbook-tb

Adolfo Martín Jimenéztax treaties (for example, Article 24 of the United Nations and OECDModel Conventions on non-discrimination).It should be kept in mind that some structures may not beaffected by these measures: for instance, typical commissionaire agreementsfor the sale of goods in market countries, or toll manufacturersthat act as service providers. In such cases, other options (for example,lowering PE thresholds or rethinking transfer pricing policies) wouldneed to be considered. In addition, where there are withholding taxeson services or royalties, it may not be unusual to find that there hasbeen an increase in the selling price of goods to domestic subsidiaries.In these cases, recharacterization of transactions would be a useful tool.5.2.4 Lowering the PE threshold through adoption of specificclauses designed to recognize a significant presence as a PEor to counteract avoidance of it5.2.4.1 IntroductionWhereas withholding tax or other similar measures on service fees/royaltiesmay be more general in scope and effect, there might be bettertargetedsolutions for certain sectors or activities. These are based on thereduction of the PE threshold and are considered below. In fact, the solutionspresented in the OECD Public Discussion Draft on BEPS Action 7mostly pursue a limited reduction of the PE threshold that is designed tocounteract the most obvious cases of (artificial) avoidance of PE in thesource country. As explained above, they fall short of aligning economicactivity and tax base in the source State. To achieve this, developing countriesmay want to consider other clauses that will reduce the PE threshold.The different types of clauses examined below do not exclude theuse of other categories and all or some of them can be used in combination.An example of their cumulative use is provided in section 5.2.4.6 below.5.2.4.2 Clauses for exploration and exploitation of natural resourcesSome countries use specific clauses to capture income from extractiveindustries, where vast amounts of money are at stake, 108 thus reducing108The following countries are reported to use these clauses: Australia,388