Decoding the Changing Landscape of PE in Light of MLI

Course Duration:
270 minutes (three epsiodes of 90 minutes each)

Article 12-15 of the MLI deals with artificial avoidance of Permanent Establishment [PE] and widens the definition of PE, so as to include cases wherein a person habitually concludes contracts or plays a principal role in conclusion of contracts of another enterprise and Commissionaire arrangements. Furthermore, it captures splitting up of contracts between closely related enterprises so as to avoid PE as also introduces anti-fragmentation rules where the core activities were treated as preparatory and auxiliary in nature.

Particularly from an Indian perspective, India has opted to apply the said provision. Pertinently, w.r.t anti-fragmentation rules, India has opted Option A which provides that the activities listed in Article 5(4) of the OECD Model Convention (2017) will be deemed not to constitute a PE only if they are of a preparatory or auxiliary character. With regards to splitting up of contracts, India is silent on its position and therefore, such a provision will apply.

What will the module cover ?

Against this backdrop, Taxsutra in association with premier law firm Lakshmikumaran & Sridharan (L&S) has unveiled a unique module on “Decoding the Changing Landscape of PE in light of MLI”. Over the course of the series, Legal Stalwart Mr. V. Lakshmikumaran (Founder and Managing Partner, L&S) & Mr. S. Vasudevan (Partner) have elaborated the key concepts by considering the recent MLI amendments [particularly from an Indian context] vis-à-vis “Fixed Place”, “Service”, “Construction” & “Agency” PE. Furthermore, the speakers have imparted technical guidance using a case study approach as well as discussed raging controversies & issues regarding the said topics in the light of several judicial precedents.

Part 1 of the module focuses on “Decoding the Changing Landscape of ‘Fixed Place’ PE in light of MLI”.

Part 2 of the series focuses on “Decoding the Changing Landscape of ‘Service & Construction’ PE in light of MLI”.

Few key highlights that have been discussed in Part 2 of the series include the following:

• Practical difficulties in profit attribution in case of bundled offshore and onshore supplies in the light of SC ruling in Hyundai Heavy Industries
• PE challenges posed by secondment of employees - Analysis of SC judgment in Morgan Stanley in the light of some recent decisions like General Motors Corporation
• COVID-19 impact on computation of threshold period for PE : Temporary abandonment of projects and forced stay of expats in India
• Significant changes brought by MLI : Aggregation of periods to counter-attempt avoidance of PE by splitting-up of contracts, while also highlighting the impact on existing judicial precedents like Sumitomo Corporation and Valentine Maritime Gulf

Part 3 of the series focuses on “Decoding the Changing Landscape of ‘Agency’ PE in light of MLI”.

 Few key highlights that have been discussed in Part 3 of the series include the following:

• Authority to conclude contracts”/ “Habitually concludes contracts or secures orders” – How courts in India and elsewhere have interpreted these phrases?
• Principal role leading to conclusion of contracts – How MLI is likely to have significant impact on business models?
• Commissionaire arrangements – Will MLI change have any impact on undisclosed agents in India?
• Concept of independent agent – What will be the impact of MLI on agents working in India for multiple group companies?
• Challenges in profit attribution to DAPE
• Limited Risk Distributor (LRD) vis-à-vis DAPE – Can a LRD lead to the constitution of PE?