Article 5 - Permanent Establishment - Serbia

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 an enterprise is wholly or partly carried on. 2. The term ''permanent establishment'' includes especially: 1) a place of management; 2) a branch; 3) an office; 4) a factory; 5) a workshop; 6) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; 7) a sales outlet; 8) a warehouse in relation to a person providing storage facilities for others; and 9) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on. 3. [MODIFIED by paragraph 1 of Article 14 of the MLI ] [The term permanent establishment likewise encompasses a building site, or a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than twelve 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 referred to in [paragraph 3 of Article 5 of this 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, [assembly or] installation project identified in [paragraph 3 of Article 5 of this Convention], or carries on supervisory 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 the period referred to in [paragraph 3 of Article 5 of this Convention]; and b) where connected activities are carried on in that other [Contracting State] at the same building site, [or] construction, [assembly or] installation project or [supervisory activities in connection therewith are carried on] 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, [assembly or] installation project or [has carried on supervisory activities in connection therewith.] 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: 1) the use of facilities solely for the purpose of storage, display or occasional delivery of goods or merchandise belonging to the enterprise; 2) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or occasional delivery; 3) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; 4) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; 5) the maintenance of a fixed place of business solely for the purpose of advertising, supply of information, scientific research or similar activities which have a preparatory or auxiliary character, for the enterprise; 6) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs 1) to 5) 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 modifies paragraph 4 of Article 5 of this Convention: ARTICLE 13 OF THE MLI -ARTIFICIAL AVOIDANCE OF PERMA- NENT ESTABLISHMENT STATUS THROUGH THE SPECIFIC ACTIVITY EXEMPTIONS (Option A) Notwithstanding [Article 5 of this Convention], the term permanent establishment shall be deemed not to include: a) the activities specifically listed in [paragraph 4 of Article 5 of this Convention] as activities deemed not to constitute a permanent establishment, whether or not that exception from permanent establishment status is contingent on the activity being of a preparatory or auxiliary character; 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. 5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 7 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 such a person: [MODIFIED by paragraph 1 of Article 12 of the MLI] 1) [has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph;] or The following paragraph 1 of Article 12 of the MLI applies with respect to subparagraph 1) of paragraph 5 of Article 5 of this Convention : ARTICLE 12 OF THE MLI - ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS THROUGH COMMISSIONNAIRE ARRANGEMENTS AND SIMILAR STRATEGIES Notwithstanding [Article 5 of this Convention], but subject to [paragraph 7 of Article 5 of the Convention 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 this Convention]. 2) 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. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or ensures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies 7. [MODIFIED by paragraph 2 of Article 12 of the MLI ] [An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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, 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 7 of Article 5 of this Convention: ARTICLE 12 OF THE MLI - ARTIFICIAL AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS THROUGH COMMISSIONNAIRE ARRANGEMENTS AND SIMILAR STRATEGIES [Paragraph 5 of Article 5 of the Convention 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. 8. 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 provisions of 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 this Convention as modified by paragraph 2 of Article 12, paragraph 4 of Article 13 and paragraph 1 of Article 14 of 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.