Chapter INTM264430
| Published date | 09 April 2016 |
| Record Number | INTM264430 |
A place of business is fixed if:
- it is established at a distinct place with
- a degree of permanence
The place of business needs to have a ‘specific geographical point’. It is immaterial how long an enterprise operates in another Country if it does not do so at a distinct place. But it is not necessary that equipment or plant be physically fixed to the ground before it constitutes ‘a fixed place of business’.
The OECD Commentary refers to the difficulties of determining a ‘single place of business’ where business activities are moved between locations. A single place of business will generally be considered to exist where, in light of the nature of the business, a particular location within which the activities are moved may be identified as constituting a coherent whole commercially and geographically with respect to the business.
The concept of commercial and geographical coherence can be illustrated by a consulting firm that regularly rents out different rooms in a particular building as offices. The ‘office hotel’ is considered to be a single place of business of that firm since the building constitutes a coherent whole geographically and commercially.
Similarly, consider a painter who undertook a single contract for a single client to paint a multi-occupied building. The building as a whole can then be regarded as a single place of business for that work.
Conversely, an area where activities are carried on as part of a single project which constitutes a coherent commercial whole may lack geographic coherence to be considered as a single place of business. The Commentary gives the example of a consultant who works at different branches in different locations but pursuant to a single project for training the employees of a bank; each branch should be considered separately.
The Commentary gives another example in relation to paragraph 3 (construction projects) where parts of a substantial structure are assembled at different locations in a country and moved to a different location for final assembly. The activities performed at each place are part of a single project which constitutes a permanent establishment if the time criterion is met.
Degree of permanenceA PE can be deemed to exist only if the place of business has a certain degree of permanency, i.e. if it is not of a purely temporary nature. In looking at permanency the commentary says permanent...
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