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Rujukan:

1. PER-32/PJ/2009 tanggal 25 Mei 2009

 

Pertanyaan:

1. Kapan berlakunya SPT Masa PPh Pasal 21 model baru ini (SPT Masa 21 baru)

2. Apa kelebihan SPT Masa 21 baru ini

3. Mengingat SPT Masa 21 ini dapat dibaca mesin sanner, apa saja yang harus diperhatikan

4. Ada berapa lembar SPT Masa 21 Baru

5. Apakah SPT Masa 21 Baru ini telah mengcover UU KUP Baru yang tidak mewajibkan pelaporan SPT Tahunan PPh Pasal 21

 

 

Jawaban:

1. SPT Masa 21 baru berlaku sejak masa Juli 2009 (PER 32 pasal 4)

2. Kelebihan SPT Masa 21 baru, salah satunya bisa dibaca dengan mesin scanner (lamp. III PER-32)

3. Yang harus diperhatikan dalam pengisian SPT Masa 21 Baru:

a. Kertas berukuran F4/Folio (8.5 x 13 inchi) dengan berat minimal 70 gram

b. membuat tanda ? (segi empat hitam) di keempat sudut kertas sebagai pembatas agar dokumen dapat di-scan

c. Kertas tidak boleh dilipat atau kusut

d. - Jika menggunakan komputer atau tulis tangan: semua isian identitas harus ditulis di dalam kotak-kotak yang disediakan

     - Jika menggunakan mesin tik: NPWP harus ditulis di dalam kotak-kotak sedangkan nama dan alamat Wajib Pajak dapat ditulis dengan mengabaikan kotak-kotak namun tidak boleh melewati batas kotak paling kanan

e. Kolom-kolom nilai rupiah atau US dollar harus diisi tanpa nilai desimal

4. SPT Masa 21 terdiri dari 4 jenis yaitu:

a. Form 1721 (induk)

b. Form 1721-T (Daftar Pegawai Tetap dan Penerima Pembayaran Berkala) - Hanya disampaikan pada:

- Masa Juli 2009 untuk yang sebelumnya telah  mempunyai kewajiban PPh Pasal 21

- Masa pertama kali mempunyai kewajiban PPh Pasal 21

c. Form 1721-II (Daftar Perubahan Pegawai Tetap untuk yang keluar, masuk dan baru memiliki NPWP) - hanya disampaikan jika ada perubahan pegawai yang keluar, masuk dan baru memiliki NPWP

d. Form 1721-I (Daftar Bukti Potong PPh Pasal 21 untuk pegawai tetap) - Hanya disampaikan pada masa Desember

5. SPT masa 21 Baru ini sepertinya telah mengcover UU KUP baru yang tidak mewajibkan pelaporan SPT Tahunan PPh Pasal 21. Ini dapat dilihat dari Buku Petunjuk Pengisian Form 1721-I. disini disebutkan bahwa:

a. Form 1721-I hanya disampaikan pada masa Desember

b. Form 1721 A1/A2 tidak harus disampaikan ke KPP

c. Form 1721 A1/A2 hanya disampaikan ke pegawai tetap atau penerima pensiun

 

Kesimpulan:

1. Untuk masa pajak Juli 2009, WP menyampaikan Form 1721 dan Form 1721-T

2. Form 1721-I hanya disampaikan pada masa Desember

3. Form 1721-II hanya disampaikan jika ada perubahan pegawai yang keluar, masuk dan baru memiliki NPWP

4. Form 1721 A1/A2 tidak perlu disampaikan ke KPP

5. Form 1721 A1/A2 disampaikan kepada pegawai Tetap atau Penerima Pensiun pada masa Desember atau pada saat WP Keluar

6. Mulai tahun pajak 2009, sudah tidak adal lagi SPT Tahunan PPh Pasal 21

 

Correct Me If I Wrong, Please

Rujukan:
1. PER-15/PJ./2006
2. PER-31/PJ./2009

Pertanyaan:
1. Apakah yang dimaksud tenaga ahli dalam PPh Pasal 21
2. Berapa tarif PPh Pasal 21 atas jasa tenaga ahli
3. Berapa DPP PPh Pasal 21 atas jasa tenaga ahli
4. Bagaimana contoh perhitungannya
5. apa beda antara PER-15/PJ./2006 dan PER-31/PJ./2009 dalam menghitung PPh Pasal 21 atas jasa tenaga ahli

Jawaban:
1. Pengertian tenaga ahli adalah orang yang melakukan pekerjaan bebas yang terdiri dari pengacara, akuntan, arsitek, dokter, konsultan, notaris, penilai, dan aktuaris (saya sering menyingkatnya dengan PAAD KNPA) dan bertindak untuk dan atas namanya sendiri, bukan untuk dan atas nama persekutuannya (PER-31 pasal 2 ayat 1 hurf d angka 1 dan pasal 3 huruf c angka 1)

2. Tarif PPh Pasal 21 menggunakan tarf PPh Pasal 17 secara akumulatif (PER 31 pasal 16), dimana
s.d. Rp 50 jt: 5%
>50 jt sd 250 jt : 15%
>250 jt sd 500 jt :25%
> 500 jt : 30%

Dalam hal tenaga ahli tersebut adalah dokter yang melakukan praktik di rumah sakit dan/atau klinik maka besarnya jumlah penghasilan bruto adalah sebesar jasa dokter yang dibayarkan pasien melalui rumah sakit dan/atau klinik sebelum dipotong biaya-biaya atau bagi hasil oleh rumah sakit dan/atau klinik (lamp. PER-31 No. IV.1)

Untuk lebih memahami pengertian secara akumulatif ini adalah akumulitif dalam tahun kalender (lamp. PER-31 No. IV.1), sebaiknya lihat contohnya supaya tidak keliru menafsirkannya

3. DPP PPh Pasal 21 atas jasa tenaga ahli adalah 50% x penghasilan bruto (PER-31 pasal 16)

4. Contoh perhitungan PPh Pasal 21 atas tenaga ahli ada pada PER-31. dikutip dari lamp. PER-31 No. V.1.1
dr. Abdul Gopar merupakan dokter spesialis jantung yang melakukan praktik di Rumah Sakit Harapan Jantung Sehat dengan perjanjian bahwa atas setiap jasa dokter yang dibayarkan oleh pasien akan dipotong 20% oleh pihak rumah sakit sebagai bagian penghasilan rumah sakit
dan 80% dari jasa dokter tersebut akan dibayarkan kepada dr. Abdul Gopar pada setiap akhir bulan. Dalam semester pertama tahun 2009, jasa dokter yang dibayarkan pasien atas tindakan dr. Abdul Gopar adalah sebagai berikut:

Bulan Jumlah Jasa Dokter yang dibayar Pasien (Rupiah)
Januari 30.000.000,00
Februari 30.000.000,00
Maret 25.000.000,00
April 40.000.000,00
Mei 30.000.000,00
Juni 25.000.000,00
Jumlah 180.000.000,00

Karena besarnya jumlah penghasilan bruto adalah sebesar jasa dokter yang dibayarkan pasien melalui rumah sakit dan/atau klinik sebelum dipotong biaya-biaya atau bagi hasil oleh rumah sakit dan/atau klinik (lamp. PER-31 No. IV.1) maka besarnya prosentase 20 % dan 80% menjadi tidak bepengaruh lagi, maka DPP PPh Pasal 21 (penghasilan bruto x 50%) adalah sbb:
Januari 15.000.000,00
Februari 15.000.000,00
Maret 12.500.000,00
April 7.500.000,00
12.500.000,00
Mei 15.000.000,00
Juni 12.500.000,00
Jumlah 90.000.000,00

Perlu diperhatikan disini, Pengenaan tarif PPh tidak langsung dikenakan atas DPP, tetapi atas DPP kumulatif dengan rincian sebagai berikut:
Januari 15.000.000,00 5%
Februari 30.000.000,00 5%
Maret 42.500.000,00 5%
April 50.000.000,00 5%
62.500.000,00 15%
Mei 77.500.000,00 15%
Juni 90.000.000,00 15%

Umumnya APW menjual 2 produk yaitu tiket dan paket wisata.

1. Penjualan Tiket pesawat

Atas penjualan tiket ini, APW mendapat komisi, sedangkan harga tiket sudah ditentukan oleh perusahaan penerbangan. Dengan demikian, tidak ada PM dan PK atas penjualan tiket yang dipungut oleh APW. PPN yang ada pada tiket merupakan pajak keluaran bagi perusahaan penerbangan. PPN yang dikenakan kepada APW adalah PPN atas jasa komisi. Dengan demikian ketika APW menagih jasa komisi penjualan tiket kepada perusahaan penerbangan maka APW harus membuat faktur pajak untuk memungut PPN atas jasa komisi penjualan tiket. PPN atas komisi ini merupakan PK bagi APW dan PM bagi perusahaan penerbangan

2. paket wisata

Atas penyerahan jasa paket wisata dapat menggunakan nilai lain dengan tarif 1% dari jumlah tagihan, karena menggunakan nilai lain maka PM nya tidak dapat dikreditkan

Laporan keuangan komersial dikoreksi karena adanya perbedaan perlakuan penghitungan laba usaha antara akuntansi dan pajak. Koreksi fiskal yang mengakibatkan bertambahnya PPh terutang disebut koreksi fiskal positif sedangkan koreksi yang menyebabkan berkurangnya PPh terutang disebut koreksi negatif.

Contoh koreksi positif,

1.  Biaya yang dibebankan atau dikeluarkan untuk kepentingan pemegang saham, sekutu atau anggota,

2. Pembentukan/pemupukan dana cadangan

3. Penggantian atau imbalan pekerjaan atau jasa dalam bentuk natura atau kenikmatan

4. Harta yang dihibahkan, bantuan atau sumbangan

5. PPh

6. Gaji yang dibayarkan kepada anggota persekutuan, firma, atau CV yang modalnya tidak terbagi atas saham

7. Sanksi administrasi

8. Selisih peyusutan komersial diatas penyusutan fiskal

9. Selisih amortisasi komersial diatas amortisasi fiskal

10. Biaya yang ditangguhkan pengakuannya

Contoh koreksi negatif:

1. Selisih penyusutan komersial dibawah penyusutan fiskal

2. Selisih amortisasi komersial dibawah amortisasi fiskal

3. PPh yang ditangguhkan pengakuannyan

 Berikut ini copy paste dari milis tentang WNI yang tinggal di Indonesia

 

Terima kasih atas perhatian Saudara terhadap permasalahan perpajakan di

Indonesia. Beberapa pertanyaan Saudara, kami jawab sebagai berikut:

1. apakah saya masih harus membayar pajak penghasilan kepada pemerintah

Indonesia?

 

Berdasarkan Pasal 4 UU PPh, Pemerintah mempunyai hak untuk memungut pajak

atas seluruh penghasilan WP berdasarkan tempat tinggal WP tanpa

memperhatikan apakah ia sebagai warga negaranya atau warga negara asing.

Wajib Pajak yang bertempat tinggal di Indonesia dikenakan pajak atas

penghasilan yang diterima atau diperoleh berasal dai Indonesia atau berasal

dari luar negeri. Selanjutnya mengacu pada pasal 2 ayat (3) UU PPh yang

mengatur definisi Subyek Pajak dalam negeri yang pada huruf a termasuk orang

pribadi yang bertempat tinggal di Indonesia atau orang pribadi yang berada

di Indonesia lebih dari 183 (seratus delapan puluh tiga hari) dalam jangka

waktu 12(dua belas) bulan.

 

Dan berdasarkan Pasal 26 UU PPh, Pemerintah mempunyai hak untuk memungut

pajak atas penghasilan yang bersumber dari Indonesia. Dengan demikian, orang

atau badan yang memerima atau memperoleh penghasilan dari Indonesia

dikenakan pajak di Indonesia tanpa memperhatikan tempat tinggal WP.

 

Maka dengan asumsi Saudara tidak bertempat tinggal (mempunyai tempat tinggal

tetap) di Indonesia dan tidak mempunyai penghasilan di Indonesia,Saudara

tidak wajib membayar pajak di Indonesia. Dan sebaliknya, jika Saudara

bertempat tinggal di Indonesia (penjelasan lebih lanjut terkait dengan

jawaban no. 2) atau memiliki penghasilan di Indonesia, pemerintah memiliki

hak untuk memungut pajak atas penghasilan yang Saudara terima.

 

2. Singapura dan Indonesia memiliki tax treaty, yang menghapus kemungkinan

pengenaan pajak berganda. Apakah ini berarti dengan saya membayar pajak

kepada pemerintah Singapura, saya tidak dikenakan pajak oleh pemerintah

Indonesia?

 

Saudara bekerja di Singapore lebih dari 183 hari, maka berdasarkan ketentuan

perpajakan Singapura, Saudara memenuhi syarat resident di negara tersebut.

Jika disamping Saudara memiliki resident di Singapore juga Saudara memiliki

tempat tinggal di Indonesia, maka akan terjadi kependudukan ganda (dual

residence) atas diri Saudara.

 

Pemecahan atas dual residence tersebut diatur dalam Tax Treaty Indonesia

?EUR” Singapore pada Article 4 paragraph (2). Jika seseorang menjadi

penduduk di kedua Negara yang menandatangani Tax Treaty, maka statusnya akan

ditentukan menurut ketentuan-ketentuan sebagai berikut:

 

1. Ia akan dianggap sebagai penduduk Negara pihak pada Persetujuan dimana ia

mempunyai tempat tinggal tetap yang tersedia baginya. Apabila ia mempunyai

tempat tinggal tetap yang tersedia di kedua Negara, ia akan dianggap sebagai

penduduk Negara di mana terdapat hubungan-hubungan pribadi dan ekonomi yang

lebih erat (pusat kepentingan- kepentingan pokok);

2. Jika Negara pihak pada Persetujuan di mana pusat kepentingan- kepentingan

pokoknya tidak dapat ditentukan, atau jika ia tidak mempunyai tempat tinggal

tetap yang tersedia baginya di salah satu Negara, maka ia akan dianggap

sebagai penduduk Negara di mana ia biasanya berdiam;

3. Jika ia mempunyai tempat kebiasaan berdiam di kedua Negara pihak pada

Persetujuan atau sama sekali tidak mempunyainya di salah satu Negara pihak

pada Persetujuan tersebut maka pejabat-pejabat yang berwenang dari Negara

pihak pada Persetujuan akan menyelesaikan masalahnya berdasarkan persetujuan

bersama

 

Dari ketentuan Treaty Indonesia ?EUR” Singapore mengenai pemecahan dual

residence tersebut (disebut sebagai tie breaker rule), maka dengan

asumsiSaudara hanya mempunyai tempat tinggal tetap (domisili) di Singapore

(Saudara bekerja di negara tersebut melampaui 183 hari atau lewat dari time

test menurut ketentuan perpajakan Singapura), maka dalam hal ini Saudara

ditetapkan merupakan resident di Singapore. Status Saudara di Indonesia

adalah non-resident.

 

Dengan status di Indonesia sebagai non-resident, Saudara hanya wajib

membayar pajak di Indonesia jika mempunyai sumber penghasilan di Indonesia

(PPh Pasal 26).

 

Jawaban no. 2 juga berlaku untuk menjawab pertanyaan Saudara no. 3 dan 4.

 

5. Kalaupun masih harus membayar pajak, berapa yang harus saya bayar?

Selisih antara pajak di Indonesia dan Singapura? Bagaimana bila saya pindah

dan bekerja yang mengenakan pajak lebih tinggi dari Indonesia, yang artinya

saya membayar pajak lebih di negara tersebut, apakah pemerintah Indonesia

akan mengembalikan selisih pembayaran pajak di negara tersebut? Tentu tidak

bukan?

 

Pertanyaan Saudara no. 5 hanya berlaku jika Saudara ditetapkan sebagai

resident di Indonesia dan bukan Singapore (bukan kondiri riil Saudara saat

ini). Jika Saudara ditetapkan sebagai penduduk Indonesia, berlaku asas

tempat tinggal sebagai mana telah kami jelaskan pada jawaban no. 1. Oleh

karena itu, PPh di Indonesia dikenakan atas seluruh penghasilan baik yang

bersumber di Indonesia maupun dari luar negeri. Atas pajak yang telah

dipotong di LN dapat dijadikan kredit pajak di Indonesia dengan

memperhatikan ketentuan pada Pasl 24 UU PPh.

 

Demikian jawaban kami. Terima kasih.

 

Pusat Pengaduan Pajak

(Tax Complaint Center)

Kantor Pusat Direktorat Jenderal Pajak

Gedung B, Lantai 4

Jl. Jenderal Gatot Subroto Kav. 40-42 Jakarta Selatan

Telepon:

500200

Faksimili:

021-525 1245

email:

pusat.pengaduan. pajak@gmail<mailto:pajak@gmail>. com

 

Iseng-iseng, saya buka-buka file. Ternyata ada file tentang Pengenalan Perpajakan Internasional dan P3B yang pernah didownload dari portal intranet DJP yang merupakan materi seminar tanggal 10-12 maret 2008. Instructor seminar tersebut adalah Mr David Partington (OECD Secretariat) dan Mr Leo Zuliani (Ministry of Finance, Netherlands). Saya fikir, file ini akan karatan dan membusuk dalam harddisk jika tidak dishare.

Karena file tersebut dalam bentuk pdf, saya mengalami kesulitan ketika mensave as ke notepad dan mengcopy pastenya ke blog ini, jika teman ingin belajar sebaiknya langsung ke sumbernya, karena pada yang tertuang dalam blog ini telah berantakan. Apa yang tuangkan disini, sepertinya semata-mata hanya untuk mempermudah saya untuk mempelajari tax treaty (maaf ya kalo egois)..he..he..

Dengan semangat bahwa knowledge is free dan semangat share blogger, mudah-mudahan bermanfaat. Amin.

Dual Resident Individual

Basic Facts

In 1995, Bernard, the owner and manager of a successful factory in State A, decided to set up a second factory in State B, a country currently experiencing dramatic economic growth Bernard would need to move to State B to oversee the construction of the newgrowth. Bernard would need to move to State B to oversee the construction of the new factory and manage it for the first 5 years. After that period Bernard expected to be able to return permanently to State A and leave a manager in charge of the day-to-day operation of the new factory.

oversee = kkt. (oversaw, overseen) mengawasi, mengatur, menjaga (a firm, play-ground).

On 30 June 1995, Bernard left State A to set up the factory in State B, which he wholly owned through a company called Quality Tools Limited. Bernard’s wife and three children remained in State A but lanned to join him 12 months later (on 30 June 1996). Between 30 June 1995 and 30 June 1996 Bernard made regular visits back to State A, totalling 8 days per month, to be with his family and to attend the monthly board of directors meetings of his new State B company, Quality Tools Limited.

For the first 6 months of his stay in State B, Bernard rented a room at an apartment hotel. He was always allocated the penthouse apartment, but the hotel reserved the right to allocate rooms based on availability.

On 31 December 1995, Bernard purchased a house in State B for himself and his family. However, Bernard’s wife and children remained in State A until 1 April 1996 when at short notice they had to move to State C to support a sick relative for six months. Bernard’s wife and children remained in State C during the period 1 April 1996 to 1 October 1996, and their family home in State A remained unoccupied. Tenants occupied the family home in State A from 1 October 1996 to 30 June 2000.

On 1 October 1996, Bernard’s wife and children joined him in State B where they lived in the house that Bernard purchased on 31 December 1995. They remained in State B from 1 October 1996 to 30 June 2000. Bernard continued to make short visits to State A, which for this period averaged 5 days duration per month, to attend board of directors meetings, to monitor the operation of his other factory in State A and to attend to private matters.

Throughout the period 1995 to 2000, Bernard maintained bank accounts and credit cards in States A and B, held life insurance policies issued in State A, remained a member of a golf club in State A and held a State A passport Bernard’s income member of a golf club in State A and held a State A passport. Bernard s income consisted of a salary from his factories in States R and S (which was earned in the States where each factory is located), directors’ fees and dividends from Quality Tools Limited, the company that owns (all board meetings took place in State A every month), and interest from a bank account held in State C.

Relevant tax law

The Double Tax Convention between States A and B follows the OECD Model Tax Convention. In States A and B the tax or income year commences on 1 January and both States tax the worldwide income of their residents. Double taxation is relieved by the credit method.

Under the domestic tax legislation of States A and B, Bernard was deemed to be a tax resident of State A for the period 1 January 1995 to 31 December 2000 and a resident of State B from 1 July 1995 to 30 June 2000.

Issues for Discussion

Determine, for the 1995, 1996, and 1997 income years which State Bernard was resident of for the purposes of the Double Tax Convention between States A and B.

 

Residence of a Company: The Directors’ Meetings

Basic facts

Sub Corp is wholly owned by the public company, Head Corp, a resident of State R. Sub Corp is incorporated in State S where it owns and operates a factory. Sub Corp is lead by an experienced and dynamic management team all of whom work and meet in State S.

Sub-Corp’s Board of Directors includes Sub-Corp’s Chief Executive and Chief Financial Officer, senior managers of Head Corp and some of Head Corp’s directors. The Director’s meetings are always held at Head Corp’s offices in State R. The Board considers various reports and recommendations prepared by Sub Corp’s management on the company’s performance and direction.

The Directors are generally satisfied with the Sub Corp’s performance and that of its senior managers and as a result the Board usually approves their recommendations. However, it is clear that the Board is in control and does not hesitate to assert its will particularly in respect of the strategic direction of the company.

Sub Corp derives business profits of $5 million from its factory in State S, royalties of $2 million from licences granted to residents of State C, and business profits from a branch operation in State C. Each year it pays a dividend of $1 million to its shareholder, Head Corp

Relevant tax law

As a result of Sub Corp’s incorporation in State S and the Director’s meetings in State R, it is a tax resident of both States under their respective domestic law. Both States R and S tax the world-wide income of residents and the locally sourced income of non-residents.

Double taxation is unilaterally relieved using the credit method. The Double Tax Convention between States R and S follows the OECD Model Tax Convention.

Issues for Discussion

• To which State would the place of effective management tie-breaker allocate residence for the purpose of the treaty?

• What factors do you consider are important in applying the place of effective management test?

• If tax residence, for the purposes of the tax treaty, were assigned by the tie-breaker to State R, what income related to Sub Corp would State S be permitted to tax to Sub Corp would State S be permitted to tax.

Case Study: Construction of the “Giant B”

• Head Contractor Ltd, a resident of State A, has bid successfully to construct an offshore oil

production platform - the “Giant B” - in State B for $100m.

• The main support structure of the “Giant B” will be constructed in State B at Deep Harbour.

The accommodation quarters and production deck will be built at Big Town a separate site 200 miles away in State B and transported by barge to Deep Harbour for assembly with the support structure before being towed to the support structure before being towed to the offshore oil field where it will be sunk into position.

• The project will take three years to complete.

• Before work commences, Head Contractor Ltd subcontracts the construction of the “Giant B” for $90m to its wholly owned subsidiary company, Builder Ltd, a resident of State C.

• Construction of the modules for the accommodation quarters and production deck at Big Town is completed without delay in 10 months and delivered by barge to Deep Harbour for assembly with the main Deep Harbour for assembly with the main structure.

• Builder Ltd has a number of sub-contractors on its site at Deep Harbour:

– Contractor 3, a resident of State C installs steel reinforcing in the main structure of the “Giant B” over a continuous 11 month period on the construction site.

– Contractor 4, a resident of State A has two separate contracts to install machinery on the “Giant B”. The first is undertaken over a 9 month period, the second contract commences 4 months after the completion of the initial contract and takes a further 5 months to complete contract and takes a further 5 months to complete.

– Contractor 5, a resident of State A, provides specialist engineering services and is required to supervise the assembly of key components over a 9 month period. Contractor 5 has the use of a desk in the engineers’ hut on the construction site.

Consider the taxation position, in State B, of all enterprises engaged on the project.

Interest

A permanent establishment of a Japanese company situated in the UK borrows from the New York Head Office of a US bank .

Is the bank entitled to the zero tax rate for interest found in the UK/USA tax treaty, even though the payer is not a resident of the UK?

Does it make any difference if the New York branch of the bank is a permanent establishment of a Japanese bank (resident in Japan) and the treaty between the UK and Japan contains a 10% tax rate on interest payments?

How would the various treaties apply to the income earned by the respective entities?

Assume all treaties follow the OECD Model.

Secondment of Staff

A foreign parent company sets up a subsidiary in your country. The subsidiary employs local staff but the management is provided in the form of a regular succession of short term secondments of senior executives from the parent company to the subsidiary. The subsidiary provides office space and support for the senior executive and pays a management fee to the parent company. Each executive continues to be paid by the parent company (usually into a foreign bank account) and remains in your country for less than 183 days. Can your country tax the salary of the employees assuming that you have a treaty with the foreign country in the form of the OECD Model?

Part I Payments for an Industrial Process

ACME Manufacturing Ltd, a resident of State S requires a new process for bonding plastic components that it produces. ACME Manufacturing seeks the assistance of Industrial Processes Ltd, a company resident of State R, which develops various manufacturing processes. Industrial Processes indicated that it has a process (called System A) that would meet most of ACME’s requirements and that it would be prepared to make the technology available to ACME for a fee of 20 cents for every unit produced using the process. It would also impose normal licensing requirements, including that the technology remains the property of Industrial Processes and is kept secret by ACME.

Alternatively Industrial Processes is prepared to develop a new process Alternatively Industrial Processes is prepared to develop a new process (called System B) that would meet all of ACME Manufacturing’s requirements. Industrial Processes offered to make system B available to ACME for either:

Part I Payments for an Industrial Process

– a lump sum payment of $2 million, where ACME becomes the owner of the new process;

– a fee of $500,000, where Industrial Processes Ltd retains ownership of the process and ACME has the right to use the process for process and ACME has the right to use the process for 10 years;

– a fee of 50 cents for every unit produced by ACME, where Industrial Processes Ltd retains ownership of the process and ACME has the right to use the process for 10 years

– Industrial Processes Ltd does not have a permanent establishment in State A.

Relevant tax law

For the purposes of this case study, the Double Tax Convention between States R and S follows the OECD Model Tax Convention, except that it permits the source State to tax royalties paid to non-residents up to a maximum amount of 10% of the gross payment for such royalties.

Issues for Discussion

You have been asked to advise how the Double Tax Convention between States R and S would be applied if payments were made from State S for under each of the four proposals:

a) payment of a fee of 20 cents for every unit produced by ACME that uses of the process “System uses of the process System A”.

b) payment of a lump sum of $2 million, for the development of the process “system B”, where ACME becomes the owner of the process developed;

c) payment of a fee of $ 500,000, which gives ACME the right to use the process “System B” for 10 years, and Industrial Processes Ltd retains ownership of the process that it develops.

d) payment of a fee of 50 cents for every unit produced by ACME using the process “System B”, and Industrial Processes Ltd retains ownership of the process that it develops.

Issues for Discussion

• Application of treaty to the 4 options for acquiring the process:

– fee of 20 per unit to use system “A”

– $ 2million for System “B” (ACME becomes owner)

– $500,000 for System “B” (ACME has right to use for 10 years

– 50 cents per unit for System “B” (ACME has right to use)

Franchise payments for the operation of a hotel chain

The facts

The Tourist Hotel Corporation (THC) of State S has entered into a franchise agreement with the International Hotel Management Group (IHMG), a resident of State R. Under the agreement, THC’s four hotels located in State S will be branded as being part of the IHMG’s international hotel chain, “Exclusive Hotels” and IHMG will advise THC on how to manage the hotels. A franchise fee based on turnover is paid to IHMG each month.

Closer examination of the franchise agreement reveals that:

– THC is permitted to use the “Exclusive Hotels” logo, a stylised letter “E”, and colour scheme for free;

– IHMG undertakes to make available to THC its extensive manuals and training material on the detailed operation of an “Exclusive Hotel”; and

– IHMG undertakes to analyse the operation of THC’s hotels and provide monthly reports and advice on improving their operation and performance.

Staff of IHMG make periodic visits to State S to discuss the operation of the THC hotels with the THC’s local staff. However, those visits would not give rise to a permanent establishment of IHMG in State S. IHMG’s reports on the operation of the THC Hotels are prepared in State R.

Relevant tax law

For the purposes of this case study, the Double Tax Convention between States R and S follows the OECD Model Tax Convention, except that it permits the source State to tax royalties paid to non-residents up to a maximum amount of 10% of the gross payment for such royalties.

Issues for Discussion

Would the monthly franchise payment constitute a royalty under Article 12 of the Double Tax Convention between States R and S?

Franchise Agreement

• Use of logo and colour Use of logo and colour scheme (free)

• Manuals & training material

• Analyse operations and provide monthly reports and ad

Iseng-iseng, saya buka-buka file. Ternyata ada file tentang Pengenalan Perpajakan Internasional dan P3B yang pernah didownload dari portal intranet DJP yang merupakan materi seminar tanggal 10-12 maret 2008. Instructor seminar tersebut adalah Mr David Partington (OECD Secretariat) dan Mr Leo Zuliani (Ministry of Finance, Netherlands). Saya fikir, file ini akan karatan dan membusuk dalam harddisk jika tidak dishare.

Karena file tersebut dalam bentuk pdf, saya mengalami kesulitan ketika mensave as ke notepad dan mengcopy pastenya ke blog ini, jika teman ingin belajar sebaiknya langsung ke sumbernya, karena pada yang tertuang dalam blog ini telah berantakan. Apa yang tuangkan disini, sepertinya semata-mata hanya untuk mempermudah saya untuk mempelajari tax treaty (maaf ya kalo egois)..he..he..

Dengan semangat bahwa knowledge is free dan semangat share bloger, mudah-mudahan bermanfaat. Amin.

Module N: Exchange of Information

Purposes of Exchange of Information

• correct application of the Convention (limited exchange)

• correct application of the Convention and the implementation of the domestic laws of the contracting

States (broad exchange)

• The exchange of information is not Taxpayers and Taxes covered restricted by Article 1 (residents and

non residents)

• Until 2000 the exchange of information is restricted by Article (only taxes covered by the

 (only taxes covered by the Convention)

• As of 2000 the restriction of Article 2 removed (all taxes)

LEGAL BASIS FOR EXCHANGE OF INFORMATION

• Bilateral conventions based on Article 26 of the OECD Model Convention on income and on capital (information on taxes covered by the Convention)

• Multilateral instruments (generally broader scope for exchange)

Confidentiality of information exchanged

• Use only for tax purposes

• Confidential as domestic tax information

• Sanctions for breach of tax confidentiality

o administrative sanction

o criminal sanctions

2005 Revision of Article 26

• First comprehensive review since the adoption ption of the 1977 Model

• Intended to ensure that Article 26 reflects current country practices

• Also takes into account recent developments (e.g. 2000 Report on Access to bank information, 2002 Model Agreement on Exchange of Information in Tax Matters)

2005 Revision of Article 26

• Many of the changes to the Article not intended to change its substance but

instead to remove doubts as to interpretation

• Commentary has been expanded considerably as a result of the addition of two new paragraphs and to take into account recent developments and current country practices

2005 Revision of Article 26: Summary

• Existing paragraph 1 spit into 2 paragraphs. New paragraph 2 includes a rule permitting disclosure of

information to oversight authorities

• Paragraph 3 is the renumbered paragraph 2 exceptions

• new paragraph 4 addresses domestic tax interest in the information

• new paragraph 5: states paragraph 3 cannot be used to decline to exchange information solely because it is held by banks, other financial institutions, nominees etc. or to exchange ownership information

Article 26 - Principles

Paragraph 1 - Obligation to exchange information of taxes covered:

– “the competent authorities shall exchange such information … ”

– Foreseeably relevant for carrying out the convention

– Foreseeably relevant for carrying out domestic law

– Unless contrary to convention

– Not restricted by paragraphs 1 and 2

• Note under 2005 Model existing paragraph 1 spit into 2 paragraphs.

Paragraph 2 - Exchanged information treated as Secret:

– Subject to secrecy laws of receiving state

– Only used for assessment, collection, enforcement, prosecution, appeals for taxes covered

– May be disclosed to public in courts and judicial decisions

– 2005 Model includes “oversight authorities”

Paragraph 3 : No obligation to exchange:

– If contrary to administrative laws and practices of either state

– Information not obtainable under laws or normal administration o either state

– Trade secrets

– Information injurious to state

• This was paragraph 2 prior to 2005 Update

Paragraph 4 - No domestic tax interest in the information necessary:

– states the principle formerly acknowledged in the Commentary

– Subject to paragraph 3 limitations other than domestic tax interest

– Added by 2005 Update of OECD Model but previously included in Commentary and accepted by

most states

Paragraph 5 - Can’t decline because information is held by a bank:

– paragraph 3 cannot be used to decline to exchange information solely because it is held by banks, other financial institutions, nominees etc. or to exchange ownership information

– Added by 2005 Update of OECD Model

Art. 26, new paragraph 5: What effect does it have?

• Previous version of Art. 26 already authorised the exchange of bank and other information identified in paragraph 5

• Addition of paragraph 5 reflects current practice of vast majority of OECD member countries

Types of Exchange of Information

• Automatic Exchanges

• Specific Exchanges

• Spontaneous Exchanges

• Simultaneous Examinations

• Industry wide Exchanges

• Visit of Authorized Representatives

Specific Exchanges

– Specific request for assistance or information regarding an ongoing examination or investigation.

• Signed by CA or someone with delegated authority

• Addressed to CA of other State

• Information can only be used for tax purposes

Types if information (contd)

• Filing Status

• Residency

• Income/Expenses Reported

• Tax ID Number

• Source and Nature of Income

• Price paid for Goods in Transactions

Iseng-iseng, saya buka-buka file. Ternyata ada file tentang Pengenalan Perpajakan Internasional dan P3B yang pernah didownload dari portal intranet DJP yang merupakan materi seminar tanggal 10-12 maret 2008. Instructor seminar tersebut adalah Mr David Partington (OECD Secretariat) dan Mr Leo Zuliani (Ministry of Finance, Netherlands). Saya fikir, file ini akan karatan dan membusuk dalam harddisk jika tidak dishare.

Karena file tersebut dalam bentuk pdf, saya mengalami kesulitan ketika mensave as ke notepad dan mengcopy pastenya ke blog ini, jika teman ingin belajar sebaiknya langsung ke sumbernya, karena pada yang tertuang dalam blog ini telah berantakan. Apa yang tuangkan disini, sepertinya semata-mata hanya untuk mempermudah saya untuk mempelajari tax treaty (maaf ya kalo egois)..he..he..

Dengan semangat bahwa knowledge is free dan semangat share bloger, mudah-mudahan bermanfaat. Amin.
Module M: Mutual Agreement Procedure Associated Enterprises: Article 9
principple:
- If associated enterprises do not deal as independent enterprises, the profits that they would have made if they had done so may be added to their profits and taxed accordingly;
- The other State shall make an appropriate adjustment

Requirements for Application of Article 9
• “associated enterprises” - an enterprise of a contracting state participates directly or indirectly
in the management control capital of an enterprise of the other contracting state; or
• same persons participate directly or indirectly in the management, control, or capital of an
enterprise of one contracting state and of an enterprise of the other contracting state
• conditions made or imposed in the commercial or financial affairs of the two enterprises differ
from those of independent enterprises 3
Consequence of Paragraph 1
• if associated enterprises do not deal as independent enterprises, the profits that they would have made if they had done so would have made if they had done so may be added to their profits and taxed accordingly
• “no re-writing of the accounts of associated enterprises is authorized if the transaction between such enterprises have taken place on normal open market commercial terms (on an normal open market commercial terms (on an arm’s length basis)”
• relationship between Article 9 and the domestic law of the contracting states
Article 25 - Mutual Agreement Procedure
– double tax agreements (DTAs) have a MAP Article
– enables Competent Authorities of 2 countries to meet and consult with each other;
– with a view to resolving double taxation;
– does not compel agreement (endeavor to resolve)
– only deals with tax - not penalties or interest charged (these not subject to relief)
Mutual Agreement Procedure: Overview
para 1 - gives taxpayers 3 years to appeal to tax authorities in residence country where taxation not
in accordance with treaty
para 2- tax authorities of both countries required to attempt to resolve issue raised in para 1
para 3 - authority to consult to resolve problems of treaty interpretation and application and to resolve any problems of double taxation whether or not dealt with in the treaty
para 4 - allows tax authorities to consult directly rather than go through diplomatic channels
para 5 - (new from 2008) mandatory compulsory arbitration
Mutual Agreement Procedure: Details
• where taxation does not accord with the convention, the taxpayer can:
– under domestic law, appeal to the courts, or
– under treaty, invoke under treaty, invoke mutual agreement procedure
• under Article 25(1), notification by taxpayer required within 3 years
• no formal procedure but most countries publish how-to guidelines for invoking mutual agreement
procedure - see also OECD MEMAP
• most common areas dealt with:
– transfer pricing (article 9)
– expense allocations to permanent establishments
– categorization of income
– treaty interpretations and application 9
• 2008 Update will introduce compulsory binding arbitration
• use of mutual agreement procedure to correct treaty deficiencies has limited scope - alternatives are to amend domestic law or treaty or, as has happened, to override treaty provisions (OECD position on treaty overrides)
• publication of mutual agreements desirable, if not essential except in specific cases where consultations with and agreement of taxpayers are important.
Mutual Agreement Procedure: Process
• Stage 1 – Involves the taxpayer and the Competent Authority (CA) of its country of residence;
• Stage 2 – Involves the CAs of the two countries endeavoring to resolve the case countries endeavoring to resolve the case
MAP: Stage 1
• Taxpayer presents case to CA
• Consideration by CA - is the case Justified?
• If so, consideration of resolution at this stage without progressing to Stage 2
• If can’t resolve in Stage 1, the C A has an obligation to move to Stage 2
MAP: Stage 2
• CA approaches the other CA in CA approaches the other CA in an endeavour to resolve the case:
• This involves:
– demonstrating to the other CA that….
– providing its position on the facts and the law, eg transfer pricing adjustment transfer pricing adjustment….
– discussion of the matter to reach a mutual agreement.
MAP
• Communication between CAs usually through the exchange of position papers
• CAs may meet to discuss significant issues
• Taxpayer not present at these CA negotiations
• Taxpayer should be kept informed during MAP process
• MAP will cease where a decision is made to wholly allow an objection
Improving MAP
• EU initiatives
• OECD’s work on improving the MAP process
– New manual (MEMAP)
– Clarifications to Article 25 Commentary
– Compulsory binding arbitration
The Key Parameters for Successful Dispute Resolution
• A dispute resolution process requires:
.. Transparency
.. Guaranteed outcome
.. Timeliness
.. An outcome based upon principles
• These parameters are essential to maintain the confidence of taxpayers
Current Article 25 of OECD Model
• Article 25(1): taxpayer may Article 25(1): taxpayer may bring case of taxation not in accordance with Convention to competent authority, notwithstanding domestic remedies
• Article 25(2): competent authorities “shall endeavour” to resolve case by mutual agreement
• Generally effective, but offers no final solution in cases where competent authorities cannot agree
OECD Efforts to Improve Dispute Resolution Procedures
• Established Joint Working Group (JWG) on Dispute Resolution
• Consultations, surveys, research
• July 2004 Progress Report discussed 30+ proposals
• Public consultations in Paris (2003) and Washington (2005)
• February 2006 Public Discussion Draft and draft MEMAP
• March 2006 public consultation in Tokyo
• Extensive • Extensive public comments received
• Joint Working Group meetings held in March and September 2006
• January 2007 CFA approval of Final Report
• February 2007 Final Report published
OECD’s February 2007 Proposals
Supplementary Dispute Resolution – mandatory, binding arbitration of Article 25(1) cases unresolved after 2 years of MAP
Changes to the OECD’s Model Tax Convention’s Article 25 Commentary — to incorporate proposals for improved MAP operation
Draft Manual on Effective Mutual Agreement Procedures (MEMAP) — to explain MAP and describe best practices for tax authorities and taxpayers
Supplementary Dispute Resolution Proposal
• Mandatory, binding arbitration of unresolved issues in Article 25(1) cases after 2-year MAP
• Flexible –mode of application left to mutual agreement of Contracting States
• Sample mutual agreement on procedures included in proposal
• Proposal recognizes not all countries are in a position to include this procedure
• Development since 2006 – no requirement to waive domestic remedies to access arbitration
Supplementary Dispute Resolution Proposal
5. Where,
a) under paragraph 1, a person has presented a case to the competent authority of a Contracting State on the basis that the actions of one or both of the Contracting States have resulted for him in taxation not in accordance with the provisions of this Convention, and
b) the competent authorities are unable to reach an agreement to resolve that case pursuant to paragraph 2 within two years from the presentation of the case to the competent authority of the other Contracting State, any unresolved issues arising from the case shall be submitted to arbitration if the person so requests. These unresolved issues shall not, however, be submitted to arbitration if a decision on these issues has already been rendered submitted to arbitration if a decision on these issues has already been rendered by a court or administrative tribunal of either State. Unless a person directly
affected by the case rejects the mutual agreement that implements the arbitration decision, that decision shall be binding on both Contracting States and shall be implemented notwithstanding any time limits in the domestic laws of these States. The competent authorities of the Contracting States shall by
mutual agreement settle the mode of application of this paragraph.
Proposed Commentary Changes
• Clarify time limitations for invoking MAP
• Clarify y triggers for MAP access
• Clarify (and limit) grounds for denying access
• Encourage suspension of collection during MAP
• Encourage appropriate treatment of interest and penalties
• Encourage use of MAP to make corresponding adjustments
• Clarify relationship with domestic law, to encourage full use of MAP
• Encourage use of Article 25(3)
Manual on Effective Mutual Agreement Procedures (MEMAP)
• Online in draft form at www.oecd.org/ctp/memap
• General guidance on MAP process
• For tax administrations and taxpayers, experienced and first time users
• 25 “Best Practices”
• Goal to enhance transparency, cooperation, timeliness, and overall effectiveness and efficiency of MAP

Iseng-iseng, saya buka-buka file. Ternyata ada file tentang Pengenalan Perpajakan Internasional dan P3B yang pernah didownload dari portal intranet DJP yang merupakan materi seminar tanggal 10-12 maret 2008. Instructor seminar tersebut adalah Mr David Partington (OECD Secretariat) dan Mr Leo Zuliani (Ministry of Finance, Netherlands). Saya fikir, file ini akan karatan dan membusuk dalam harddisk jika tidak dishare.

Karena file tersebut dalam bentuk pdf, saya mengalami kesulitan ketika mensave as ke notepad dan mengcopy pastenya ke blog ini, jika teman ingin belajar sebaiknya langsung ke sumbernya, karena pada yang tertuang dalam blog ini telah berantakan. Apa yang tuangkan disini, sepertinya semata-mata hanya untuk mempermudah saya untuk mempelajari tax treaty (maaf ya kalo egois)..he..he..

Dengan semangat bahwa knowledge is free dan semangat share bloger, mudah-mudahan bermanfaat. Amin.

What is E-Commerce

• Transactions which are conducted over an electronic network where electronic network where the buyer and merchant are not at the same physical location eg plastic card transactions via the Internet.

• The transacting of business electronically rather than via paper

Don’t confuse

• New technologies

• E-commerce

• Outsourcing and offshoring

Implications of E-Commerce

• Products can be sourced from a wider market

• Blurring of national boundaries

• Consumers can choose from a much broader range of goods and an unprecedented ability to hunt for bargains

• Reduction of costs

• Use of new technologies

• Opportunities for workers, consumers, businesses and tax systems

• Physical presence my no longer be necessary in a country

New Ways of Doing Business is Nothing New

• Face to face

• Letter/mail order

• Telegraphic

• Phone

• Telex

• Fax

• Internet

New technology, same transitions

• OECD considers existing rules developed for traditional transactions can be applied to ecommerce

transactions

• Wide agreement that taxation of e-commerce should be neutral as compared to the taxation of

traditional transactions

Application of Traditional International Taxation Concepts to E-Commerce

• Trading with a country v trading in a country

• The concept of source and attribution of income:

– FOB Sales of Goods (where sold)

– Services (where performed)

– Interest, Dividends, royalties (where paid)

• Presence is a key criteria

– Does e-commerce do away with the need to be present in a country?

– Does E-commerce create new business opportunities?

Application of E-Commerce to Tax Treaties

• Business profits:

Is a web site a – Is a web site a PE ?

– Does web hosting give rise to PE?

– Does use of a server give rise to a PE?

– Is the activity preparatory or auxiliary?

– Is there a dependent agent?

Conclusions* - Web Site

• Web site alone cannot be a P.E.

• It is only a combination of • It is only a combination of software and data

• Does not constitute tangible property

• Fails location test: no place of business, as no facilities

(* See Article 5 Commentary 42.1 - 42.10)

Conclusions - Web Hosting

• Web site hosted on a server of an ISP for a fee

• Does not result in a P.E. for enterprise carrying on business through website

• Server and space on disk is typically not at the disposal of the enterprise (no place of business)

Conclusions Server

• P.E. at the location of the server only if:

– Server at the disposal of the enterprise (owned or leased)

– Enterprise carries on business functions through it for a sufficient period of time

– Functions performed are an essential and significant part of business activity going part of business activity going beyond auxiliary and preparatory activities

– Human intervention is not a requirement to constitute a P.E.

Attribution Of Income

• If a server is considered to be a PE - what income may be attributed to that PE?

• Identify the functions performed by the enterprise as whole and by the PE. In particular

• Very difficult in such a case:

– What is the server actually doing?

– Comparing with traditional functions

Attribution Of Income (2)

• May be theoretical issue - server may be located in any jurisdiction

• In the face of attribution of profits, web site may be moved to a haven

Preparatory Or Auxiliary ?

• The key issue:

– Case-by-case analysis of what is done

– A few examples are given

• But the functions must not be an essential and significant part of the activity of the enterprise

Preparatory Or Auxiliary

• What are core functions depends on the business business carried on

• ISP is in the business of operating servers

• E-tailer: not in the business of operating servers but need to look at functions performed at the

location through the server (example)

Dependent Agent PE

• Only in very unusual circumstances will an ISP constitute a dependent agent PE because:

• ISP (and the web site) are not agents

• ISP is independent

• ISP does not have authority to conclude contracts in the name of the enterprise

Part II

Outsourcing and offshoring

Tax Issues – overview

• Many and varied – depends largely on:

– the nature and location of the activities

– relationship between the parties (arm’s length or related)

– whether covered by a tax treaty

– domestic law in host state

• Spectrum of transactions: largely domestic between unrelated parties through to complex integrated structures between related parties.

• Most outsourcing transactions will involved the usual considerations for any cross border transactions:

– residence rules

– source rules

– income measurement rules

– possible application of thin capitalisation and transfer pricing rules

– possible application of non-resident withholding taxes

– taxation of employees

– application of tax treaties

• Interesting Issues commonly concern:

–Profit calculation (particularly between related parties)

– Whether the activities in the host jurisdiction will give rise to a taxable presence in that jurisdiction.

• I will focus on tax treaties as this tends to restrict domestic taxation

• Important policy issues – not just about whether a country can tax – is it wise to aggressively pursue some transactions

Example 1: Services preformed in Source State

• Scenario: USA doctor transmits audio data to India to be typed by an unrelated Indian company.

 

Example 1: Services Performed in Source State

• Scenario: USA doctor transmits audio data to India to be typed by India to be typed by an unrelated Indian company.

• Tax issues: relatively simple:

– Income easily calculated and earned exclusively in India by Indian typists

– USA doctor is not earning income in India

Example 2: Outsourced software development

• Scenario: Software Inc, of the USA, has a subsidiary in Bangalore which develops software

that is incorporated into Software Inc’s very profitable programmes.

• Calculation of the income of the Indian Subsidiary

– What is the correct remuneration for the work done in India?

• Wage rates in India (say $14 per hour)

• Wage rates in the USA (say $50 per hour)

• The developed software is later found to be very profitable

– What functions and risks are in India?

Example 3: Telephone sales and services through an agent overseas

Part a) Services through a call centre

Example 3: Part a) Services through a call centre

Example 3: Telephone sales and services through an agent overseas

Part b) Sales through a call centre

Dependent Agent PE – Art 5 (5)

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person— other than an agent of an independent status to whom paragraph 6 applies— is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

Example 3: Telephone sales and services

through an agent overseas

Part c) Sales and services through a call centre

Example 3: Part c) Sales and services through a call centre

Dependent Agent PE – Art 5 (5)

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person—other than an agent of an independent status to whom paragraph 6 applies—is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that aragraph.

Example 4: Contract Assembly

• Scenario: Company X, a manufacturer of electronic products (resident of State R) decides to contract the assembly of some of the components to an unrelated Company Y in a neighboring State (State S).

• The components shipped to State S remain the property of Company X

• Company X staff make periodic visits to Company Y to coordinate the activity.

Example 4: Contract Assembly

• Would Company X’s activities in State S give rise to it having a permanent establishment in State S?

• Would the answer be different if Company X had staff based continuously at the premises of Company Y to provide technical support?

• Would the answer be different if Company X provided the equipment used by Company Y in assembling the components?

• Art Art 5 (4) :

b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

• Would the answer be different if Company X had staff based continuously at the premises of Company Y to provide technical support?

• Would the answer be different if Company X provided the equipment used by Company Y in assembling the components?