Update on BEPS Action 7 (Preventing the Artificial Avoidance of PE Status)

The main purpose of the PE conceptunder the OECD Model TaxConvention (“OECD-MC”) is todetermine whether a Contracting Statehas the right to tax the profits of anenterprise that is resident in the otherContracting State. According toArticle 7 of the OECD-MC, aContracting State cannot tax businessprofits of enterprises resident in theother Contracting State unless it carrieson its business through a PE loca-ted in its territory.