Action 7: Preventing the artificial avoidance of permanent establishment status

Tax treaties generally provide that the business profits of a non-resident enterprise are taxable in a state only to the extent that the non-resident enterprise has a permanent establishment (PE) in that state to which such profits are attributable. The PE definition included in tax treaties thus provides a crucial threshold to determine whether a non-resident enterprise must pay income tax on its business income in another state, explain Jacques Sasseville and Edward Barret.