Dependent Agents after BEPS : Especially with regard to commissionaire arrangements

Abstract: The OECD estimates that every year between 100 and 240 billion US dollars of tax revenue is lost due to domestic tax base erosion and profit shifting resulting from the business practices used by multinational enterprises. In 2013, the BEPS Action Plan, encompassing 15 different actions, was sanctioned in response. In 2015, the Final Report on BEPS Action 7 was published. BEPS Action 7 targets the artificial avoidance of permanent establishment status by proposing changes to the wording of the articles of the OECD Model and its commentary. Commissionaire arrangements are common practice among certain multinational enterprises, whereby a non-resident enterprise enlists another entity to sell products owned by the non-resident. Under the proposals of BEPS Action 7, such an arrangement may result in the creation of a permanent establishment of the non-resident. This thesis examines the implications of the BEPS proposals by examining how the principles of attributing profits to permanent establishments is likely to impact commissionaire arrangements. The thesis also explores the conditions that motivated the proposals, and considers unintended consequences that may arise because of the proposals. The thesis concludes that under the Authorized OECD Approach, it is uncertain whether the new permanent establishments will contribute to a significant increase in the tax base of the host state. The thesis also concludes that it is perceivable that the uncertainty relating to the interpretation of the OECD Model provisions governing this area may persist after the implementation of the proposals.