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A surprising decision from the French Supreme Administrative Court regarding permanent establishments: interpretation of the notion of “dependent agent”  in light of subsequent OECD commentaries and MLI

December 17, 2020

A surprising decision from the French Supreme Administrative Court (the “Conseil d’Etat”) regarding permanent establishments: interpretation of the notion of “dependent agent”  in light of subsequent OECD commentaries and MLI - Conseil d’Etat decision of 11 December 2020 n° 420174, Conversant International Ltd  

The Conseil d’Etat has changed its position regarding the application of the OECD commentaries and has thereby broadened the notion of dependent agent characterizing a permanent establishment.  

The Conseil d’Etat refers for the first time to OECD commentaries published subsequent to the tax treaty to be interpreted. The Supreme Court deduces from these commentaries that the Irish parent company had a permanent establishment in France through its French subsidiary given that the latter could choose whether or not to enter into contracts with advertisers and was responsible for performing tasks necessary to concluding contracts. To limit oneself to providing a standard form of contract, to validate the contract by signing it is no longer sufficient to avoid the existence of a permanent establishment.  

This decision is surprising in light of the past and gives a glimpse of the first undesirable effects of Article 12 of the OECD’s Multilateral Instrument for the numerous States having notified reservations. This provision accepts the characterization as a permanent establishment for any person who, as dependent agent, usually plays a major role leading to the conclusion of contracts which, routinely, are executed without any significant modification by the company.

 

Should you have any question or need additional information, please feel free to contact our international taxation team by email: Severine.Lauratet@fidal.com 

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