Article 5 - Permanent Establishment - Russia

ARTICLE 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Agreement, 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) an installation or structure used for the exploration or exploitation of natural resources; (h) a farm, plantation or other place where agriculture, forestry, plantation or related activities are carried on; (i) a premises used as a sales outlet or for receiving or soliciting orders; (j) [MODIFIED by paragraph 1 of Article 14 of the MLI] [a building site or construction, installation or assembly project or supervisory activities in connection therewith, but only if such site, project or activities continue for a period of more than 12 months. However, the competent authorities of the Contracting States may, in particular cases, agree by mutual agreement to consider the supervisory activities in connection with a building site or construction, installation or assembly project as not constituting a permanent establishment also in the cases in which the duration of works on a building site or construction, installation or assembly project exceeds 12 months.] The following paragraph 1 of Article 14 of the MLI applies and supersedes subparagraph (j) of paragraph 2 of Article 5 of this Agreement: ARTICLE 14 OF THE MLI - SPLITTING-UP OF CONTRACTS For the sole purpose of determining whether the period (or periods) referred to [in subparagraph (j) of paragraph 2 of Article 5 of the Agreement] 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 ], installation [or assembly] project [ or other specific project identified in the [subparagraph (j) of paragraph 2 of Article 5 of the Agreement ,] 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 [subparagraph (j) of paragraph 2 of Article 5 of the Agreement]; 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 [supervisory activities in connection therewith other place identified in the [subparagraph (j) of paragraph 2 of Article 5 of the Agreement ] 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 [supervisory activities in connection therewith other place identified in the [subparagraph (j) of paragraph 2 of Article 5 of the Agreement ]. 3. [ 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 are 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 or 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 a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or an auxiliary character; (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e).] The following paragraph 2 of Article 13 of the MLI applies with respect to the paragraph 3 of Article 5 of this Agreement: ARTICLE 13 OF THE MLI - ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS THROUGH THE SPECIFIC ACTIVITY EXEMPTIONS Notwithstanding the provisions of [Article 5 of the Agreement], that define the term permanent establishment , the term permanent establishment shall be deemed not to include: (a) the use of facilities solely for the purpose of storage are 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 or 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 a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or an auxiliary character; (f) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any activity not described in subparagraphs a) to e); (g) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) to f), provided that such activity or, in the case of subparagraph g), 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 3 of Article 5 of the Agreement as modified by paragraph 2 of Article 13 of the MLI: [Paragraph 3 of Article 5 of the Agreement, 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 Agreement]; 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. 4. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 5 applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if (a) [ MODIFIED by paragraph 1 of Article 12 of the MLI ] [he has, and habitually exercises in that State, an authority to conclude contracts or carry on any business activities on behalf of the enterprise, unless his activities are limited to those specified in paragraph 3 of this Article ; or] The following paragraph 1 of Article 12 of the MLI applies with respect to the subparagraph (a) of paragraph 4 of Article 5 of this Agreement : ARTICLE 12 OF THE MLI - ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS THROUGH COMMISSIONNAIRE ARRANGEMENTS AND SIMILAR STRATEGIES Notwithstanding the provisions of [Article 5 of the Agreement], that define the term permanent establishment but subject to [paragraph 5 of Article 5 of the Agreement as modified by paragraph 2 of Article 12 of the MLI], where a person is acting in a [Contracting State] on behalf of an enterprise and, in doing so, habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise, and these contracts are: (a) in the name of the enterprise; or (b) for the transfer of the ownership of, or for the granting of the right to use, property owned by that enterprise or that the enterprise has the right to use; or (c) for the provision of services by that enterprise, that enterprise shall be deemed to have a permanent establishment in that [Contracting State] in respect of any activities which that person undertakes for the enterprise unless these activities, if they were exercised by the enterprise through a fixed place of business of that enterprise situated in that [Contracting State], would not cause that fixed place of business to be deemed to constitute a permanent establishment under the definition of permanent establishment included in the provisions of [Article 5 of the Agreement]. (b) he habitually secures orders for the sale of goods or merchandise in that State exclusively or almost exclusively on behalf of the enterprise or other enterprises controlled by it or which have a controlling interest in it; or (c) 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; or (d) in acting as described in (b) above, he manufactures or processes in that State for the enterprise, goods or merchandise belonging to the enterprise. 5. [MODIFIED by paragraph 2 of Article 12 of the MLI] [An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, 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 itself or on behalf of that enterprise and other enterprises controlling, controlled by, or subject to the same common control as that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.] The following paragraph 2 of Article 12 of the MLI applies with respect to paragraph 5 of Article 5 of this Agreement : ARTICLE 12 OF THE MLI - ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS THROUGH COMMISSIONNAIRE ARRANGEMENTS AND SIMILAR STRATEGIES [Paragraph 4 of Article 5 of the Agreement as modified by Paragraph 1 of Article 12 of the MLI] shall not apply where the person acting in a [Contracting State] on behalf of an enterprise of the other [Contracting State] carries on business in the first-mentioned [Contracting State] as an independent agent and acts for the enterprise in the ordinary course of that business. Where, however, a person acts exclusively or almost exclusively on behalf of one or more enterprises to which it is closely related, that person shall not be considered to be an independent agent within the meaning of this paragraph with respect to any such enterprise. 6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting 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 of the other. The following paragraph 1 of Article 15 of the MLI applies to this Agreement: 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 Agreement as modified by paragraph 2 of Article 12, 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.