Private ruling: Permanent Establishment
Published: December 2014
Ruling period: Financial year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Question and Answer | Do you have a permanent establishment in Country X? | No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You were engaged by a company in Country X Invoices dating back more than 1 year remain unpaid. You request for payment from the Company in Country X is that they must withhold tax from the outstanding amounts. The Company in Country X believe that you should be deemed to have a Permanent Establishment in Country X, therefore tax needs to be withheld in Country X. You have provided the following timeline of your employees' presence in Country X over the entire period: Site visit to discuss progress of works Duration <10 days The inspection of construction progress Duration <15 days Inspection of fire damage Duration <10 days Further Inspections Duration <30 days Facility commissioning Duration about 30 days Your employees simply visited the site on each occasion then returned to Australia. No employee or representative was left "on the ground" in Country X as a representative or agent or in any capacity outside of the above dates.

Relevant legislative provisions: International Tax Agreements Act 1953 Schedule 35 | Schedule 35, Article 5 | Schedule 35, Article 5(1) | Schedule 35, Article 5(2) | Schedule 35, Article 5(3) | Schedule 35, Article 5(4) | Schedule 35, Article 5(5) | Schedule 35, Article 5(6) | Schedule 35, Article 5(7)

Reasons for decision: Detailed Reasoning - Permanent Establishment: Broadly, the definition of "permanent establishment" means, in relation to a person, a place in a country at or through which a person carries on any business. That place must have an element of permanence, both geographic and temporal; permanence must be construed in the context of each particular business and is a question of fact and degree, but it does not mean forever). The need for temporal permanence requires that a business operates at a place for a period of time. As a rule of thumb, if a business operates at or through a place continuously for six months or more, it will generally be considered to be temporally permanent. Australia and Country X defined the term Permanent Establishment in the double tax agreement. | Detailed Reasoning - The Double Tax Agreement: Schedule Z to the Agreements Act contains the tax treaty between Australia and the Country X (the Country X Agreement). Relevantly Article W of the Country X Agreement defines the term Permanent Establishment PE. Article W(1) of the Country X Agreement contains the general definition of a PE which is as follows: for the purposes of this agreement, the term " Permanent Establishment " means a fixed place of business through which the business of an enterprise is wholly or partly carried on Article W(2) of the Country X Agreement further illustrates the general definition by providing listed facilities that are included in the definition. For example, at subparagraph (a): a place of management Taxation Ruling TR 2001/13 at paragraphs 101 to 105 explains the Commissioner's view that the OECD Model Tax Convention and Commentaries are relevant to interpreting Australia's tax treaties. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model Tax Convention explains that the general definition of a PE contains the following conditions: • the existence of a 'place of business', ie a facility such as premises or in certain instances, machinery or equipment; • this place of business must be 'fixed', i.e. must be established at a distinct place with a certain degree of permanence; • the carrying on of the business of the enterprise through this fixed place of business. This means usually that persons who, in one way or another, are dependent on the enterprise (personnel) conduct the business of the enterprise in the State in which the fixed place is situated. You do not have any facilities listed in Article W(2) of the Country X Agreement, or more importantly a fixed place of business within the general definition as provided by Article W(1) of the Country X Agreement. Notwithstanding, the latter paragraphs of Article W of the Country X Agreement which can deem an enterprise to have a Permanent Establishment must also be considered to resolve the question. On the above facts, Article W(3) of the Country X Agreement has no application. Article W(4) of the Country X Agreement provides a list of exceptions to the definition which relevantly includes that an enterprise will not be deemed to have a PE merely because it has the use of facilities solely for the purpose of the storage of goods and/or maintains stock for the purpose of storage. Article W(5) of the Country X Agreement deems there to be a PE, in certain circumstances, where a person, other than an agent of independent status to whom Article W(6) of the Country X Agreement applies, acts on behalf of the enterprise. However, Article W(6) of the Country X Agreement provides that an enterprise shall not be deemed to have a PE merely because it carries out business in the other state through an agent of independent status where that person is acting in the ordinary course of that person's business. You are an independent agent acting in the ordinary course of its business in accordance with Article W(6) of the Country X Agreement, Article W(5)(b) of the Country X Agreement will not deem the taxpayer to have a PE in Country X. Article W(7) of the Country X Agreement makes it clear that even if the Company in Country X exerts control over who you have carrying out your business in Country X, this will not in itself result in a PE for the taxpayer in Country X. In summary therefore, you do not have a Permanent Establishment in Country X pursuant to Article W of Schedule Z to the Agreements Act.