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permanent establishment


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Most tax treaties operate so that business profits are taxed in the country of the taxpayer’s residence, unless the taxpayer has a ‘permanent establishment’ in the other territory. In the model double taxation agreement drawn up by the Organization for Economic Cooperation and Development, a permanent establishment is defined as a ‘fixed place of business through which the business of an enterprise is wholly or partly carried on’. The model agreement goes on to state specifically that the term ‘permanent establishment’ includes a place of management, branch, office, factory, workshop, mine, oil or gas well, quarry, or any other place of extraction of natural resources.


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