handbook-tb

Jinyan Li4.3.3 “Significant business presence”Replacing the PE test with a “significant presence” test has been suggestedas an option. 97 The criteria for applying this test include: (a)relationships with customers or users extending over six months, combinedwith some physical presence in the country, directly or via adependent agent; (b) the sale of goods or services by means involving aclose relationship with customers in the country, including (i) througha website in the local language, (ii) offering delivery from suppliers inthe jurisdiction, (iii) using banking and other facilities from suppliersin the country or (iv) offering goods or services sourced from suppliersin the country; and (c) supply of goods or services to customers inthe country resulting from or involving systematic data-gathering orcontributions of content from persons in the country. 98This proposal is not limited to digital businesses and emphasizeseconomic presence as opposed to physical presence. It still requiressome significant presence in the market jurisdiction. It would notinclude many businesses involved in the digital economy. For example,a software designer supplying a program in digital form to customersall over the world from a single website in the language of its residencecountry would not be covered. A significant business presencetest encompasses a fixed base PE, an agency PE as well as a websiteor other methods of value creation in the market country. Its goal isto ascertain the level of a non-resident company’s engagement in theeconomy of the market country and the company’s benefit from theinfrastructure and business environment created by that country. It isconsistent with the policy rationale of the current test. However, it is aradical change from the existing test, on which it could be difficult forcountries to reach an agreement.4.4 Attribution of profitMerely revising the PE test will not suffice to protect the tax base of themarket jurisdictions. The current profit attribution rules must also be97Comments of the BEPS Monitoring Group on the OECD Public DiscussionDraft on BEPS Action 1, published on the OECD Website (BMGComments).98Ibid.444