Permanent Establishment for Investors in Private Equity Funds – A Legal Analysis in Light of the Changes to the OECD Model (2017)
49 Pages Posted: 3 Jan 2019 Last revised: 14 Feb 2019
Date Written: December 18, 2018
The article analyzes whether the investment in a private equity fund may create a permanent establishment (PE) for foreign investors. The analysis is divided into two main parts, as the question of creating a PE for the foreign investors is considered with respect to both the main PE-rule and the agency PE-rule. The amendments to the PE-definition prescribed in the OECD/G20 BEPS Report on Action 7, and incorporated into the 2017-version of the OECD Model with Commentary, are taken into consideration. It is concluded that the final outcome depends on the specific setup of the private equity fund at hand, and that some degree of uncertainty may often remain. Moreover, the recent amendments to the PE-definition do not appear to have reduced this uncertainty – rather the contrary.
Keywords: Private Equity Funds, International Tax Law, Permanent Establishment, Dependent Agent, BEPS, International Tax Policy
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