How will the MLI change the definition of permanent establishment?

Changes to the permanent establishment (PE) definition developed through the work on BEPS Action 7 and included in the MLI address techniques used to inappropriately avoid the existence of a PE, including through the replacement of distributors with commissionnaire arrangements, through strategies where contracts which are substantially negotiated in a State are not formally concluded in that State because they are finalised or authorised abroad, or where the person that habitually exercises an authority to conclude contracts in the name of a foreign enterprise claims to be an “independent agent” even though it is acting exclusively or almost exclusively for closely related enterprises. These changes also address strategies based on the specific activity exceptions in Article 5(4) of the OECD Model Tax Convention by restricting these exceptions to preparatory or auxiliary activities and by addressing the fragmentation of business activities between closely related enterprises in order inappropriately to take advantage of these exceptions.


For more information, also see the

<a href=”″ target=”_blank”>Frequently Asked Questions on Action 7 </a>