handbook-tb

Adolfo Martín Jimenézthat the period for subcontractors should be imputed to theprincipal contractor;‣ ¾ The clause obviously does not address the fragmentation of theactivities which are covered by Article 5 (1) or (3) of the UnitedNations and OECD Model Conventions. The limited force ofattraction principle in Article 7 of the United Nations ModelConvention can help in this regard, although, it has very importantlimits, as explained above.These types of clauses have been proposed in the OECD ModelConvention with regard to the alternative service PE provision inparagraph 42.45 of the Commentary on Article 5 of the OECD ModelConvention, or are being considered by the United Nations with regardto Article 5 (3) (b) of the United Nations Model Convention. 113 Themain difference between these clauses and the one used as an exampleis that they refer to the “same or a connected project” and, therefore,their ability to expand source-country taxation is much more limited.This is because they do not use a mere “physical presence test” and thescope of the service PE provision is limited by commercial coherence.A similar clause is one of the alternatives (the other dealingwith the splitting-up through anti-avoidance provisions) proposedin the OECD Public Discussion Draft on BEPS Action 7, to combatthe splitting-up of contracts with regard to Article 5 (3) of the OECDModel Convention. The effects of the OECD proposal would be muchmore limited from the perspective of the source country if a service PEparagraph was not included. In the OECD context, the clause simplyfunctions as a device for computation of the 12-month period, whichhelps counteract abuse through the accumulation of time periods spenton the same project/site by associated companies. However, unlike inthe above-mentioned example, it does not require a physical presencetest (and an anti-avoidance clause for computation of this test) to beadded to the PE definition.113See C. Devillet, “Note on Article 5: the meaning of ‘the same or aconnected project’,” supra note 102 (in particular, draft paragraph 12.5 of theCommentary on Article 5 of the United Nations Model Convention).392