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Clifford Chance

Clifford Chance


BEPS Action 7 – what do the OECD's new permanent establishment proposals mean for business?

5 October 2015

For almost a hundred years, OECD member countries have accepted that a non-resident's business will only become subject to tax in certain narrow circumstances. This has been widely criticised in recent years by the media and politicians – and it may now be changing.

The OECD proposed in a discussion draft published on 15 May 2015 that mere negotiation should create a taxable permanent establishment. This has wide implications for cross-border trade and business.

The OECD published its Final Report on Action 7 on Monday 5 October 2015. The Final Report to substantively adopts the preferred options from the 15 May discussion draft.

It is clear that if the proposals made by the OECD were to be widely adopted, businesses would find it more difficult and expensive to carry out cross-border business, with a risk of double taxation arising. One of the key questions now is how widely the proposals will be taken up in different jurisdictions and, where they are accepted, to what extent.

We look at the practical impact of the proposals on key industries and sectors and ask what steps businesses should be taking to anticipate these changes.

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