The Attribution of Profits to a Dependent Agent PE – If the Dependent Agent Is a Commissionaire (Wholly Owned Subsidiary) of the Principal

Abstract

In this article the author proposes – based on numeric examples – an attribution of profits to a dependent agent PE where the PE is created by a commissionaire. The topic is discussed as a result of recent changes to the definition of “dependent agent PE” under BEPS Action 7 and in the context of 2016 and 2017 OECD “profit attribution” discussion drafts. The analysis takes into account the impact of the revised TP Guidelines on risk under BEPS Actions 8-10 and the overlap between the concepts of significant people functions under the AOA and risk control functions under the revised TP Guidelines. The discussion will be based on three scenarios: (i) where the contractual allocation of risks and assets is aligned with the actual control over them, (ii) where there is a mismatch between the contractual arrangements and the control over the risks and assets and (iii) where the revised TP Guidelines and PE profit attribution rules interact with each other in cases of a mismatch outlined above.