Article 5 - Permanent Establishment - Netherlands

ARTICLE 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Convention, the term permanent establishment means a fixed place of business through which the business of the enterprise is wholly or partly carried on. 2. The term permanent establishment includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a warehouse in relation to a person providing storage facilities for others; (h) a premises used as a sales outlet; (i) an installation or structure used for the exploration of natural resources provided that the activities continue for more than 183 days. 3. [MODIFIED by paragraph 1 of Article 14 of the MLI] [ A building site or construction, installation or assembly project constitutes a permanent establishment only where such site or project continues for a period of more than six months.] The following paragraph 1 of Article 14 of the MLI applies and supersedes paragraph 3 of Article 5 of this Convention: ARTICLE 14 OF THE MLI - SPLITTING-UP OF CONTRACTS For the sole purpose of determining whether the period (or periods) referred to [in paragraph 3 of Article 5 of the Convention] has been exceeded: (a) where an enterprise of a [Contracting State] carries on activities in the other [Contracting State] at a place that constitutes a building site [or] construction [, project, or] installation [or assembly] project [ or other specific project identified in the paragraph 3 of Article 5 of the Convention, or carries on supervisory or consultancy activities in connection with such a place ],and these activities are carried on during one or more periods of time that, in the aggregate, exceed 30 days without exceeding period or periods referred to in [paragraph 3 of Article 5 of the Convention; and (b) where connected activities are carried on in that other [Contracting State] at [ or, where the relevant provisions of the covered tax agreement applies to supervisory or consultancy activities in case of supervisory activities, in connection with ] the same building site [, or] construction [, or] installation [or assembly] project [ or other place identified in the [paragraph 3 of Article 5 of the Convention ] during different periods of time, each exceeding 30 days, by one or more enterprises closely related to the first-mentioned enterprise, these different periods of time shall be added to the aggregate period of time during which the first-mentioned enterprise has carried on activities at that building site [, or] construction [, or] installation [or assembly] project [ or other place identified in the [paragraph 3 of Article 5 of the Convention ]. 4. [ MODIFIED by paragraph 2 of Article 13 of the MLI] [ Notwithstanding the preceding provisions of this Article, the term permanent establishment shall be deemed not to include: (a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage of display; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise; (e) the maintenance of fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for other activities which had preparatory or auxiliary character, for the enterprise; (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.] The following paragraph 2 of Article 13 of the MLI applies with respect to the paragraph 4 of Article 5 of this Convention: ARTICLE 13 OF THE MLI - ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS THROUGH THE SPECIFIC ACTIVITY EXEMPTIONS Notwithstanding [Article 5 of the Convention], the term permanent establishment shall be deemed not to include: (a) (i) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise; (ii) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage of display; (iii) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (iv) the maintenance of fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise; (v) the maintenance of fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for other activities which had preparatory or auxiliary character, for the enterprise; (b) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any activity not described in subparagraph a); (c) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) and b), provided that such activity or, in the case of subparagraph c), the overall activity of the fixed place of business, is of a preparatory or auxiliary character. The following paragraph 4 of Article 13 of the MLI applies to paragraph 4 of Article 5 of the Convention as modified by paragraph 2 of Article 13 of the MLI: [Paragraph 4 of Article 5 of the Convention, as modified by paragraph 2 of Article 13 of the MLI] shall not apply to a fixed place of business that is used or maintained by an enterprise if the same enterprise or a closely related enterprise carries on business activities at the same place or at another place in the same [Contracting State] and: (a) that place or other place constitutes a permanent establishment for the enterprise or the closely related enterprise under the provisions of [Article 5 of the Convention]; or (b) the overall activity resulting from the combination of the activities carried on by the two enterprises at the same place, or by the same enterprise or closely related enterprises at the two places, is not of a preparatory or auxiliary character, provided that the business activities carried on by the two enterprises at the same place, or by the same enterprise or closely related enterprises at the two places, constitute complementary functions that are part of a cohesive business operation. 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 in one of the States, on behalf of an enterprise of the other State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned State, if (a) he has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) he has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise; 6. An enterprise of one of the States shall not be deemed to have a permanent establishment in the other State merely because it carries on business in that other State through a broker, a general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph if it is shown that the transaction between the agent and the enterprise were not made under arm's length conditions. 7. The fact that a company which is a resident of one of the States controls or is controlled by a company which is a resident of the other State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment or the other. The following paragraph 1 of Article 15 of the MLI applies to this Convention: ARTICLE 15 OF THE MLI - DEFINITION OF A PERSON CLOSELY RELATED TO AN ENTERPRISE For the purposes of the provisions of [Article 5 of the Convention as modified by paragraph 4 of Article 13 and paragraph 1 of Article 14 of the MLI], a person is closely related to an enterprise if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same persons or enterprises. In any case, a person shall be considered to be closely related to an enterprise if one possesses directly or indirectly more than 50 per cent of the beneficial interest in the other (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company's shares or of the beneficial equity interest in the company) or if another person possesses directly or indirectly more than 50 per cent of the beneficial interest (or, in the case of a company, more than 50 per cent of the aggregate vote and value of the company's shares or of the beneficial equity interest in the company) in the person and the enterprise.