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ARTICLE 5

Permanent Establishment

(1) For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business in which the business of an enterprise is wholly or partly carried on.

(2) The term "permanent establishment" shall include specifically:

  • (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, drilling or working ships used for exploration and exploitation of natural resources;
  • (g) a farm or plantation;

(3) The term "permanent establishment" likewise encompasses:

  • (a) a building site, 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 six months;
  • (b) the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that such activities continue for the same project or a connected project for a period or periods aggregating more than six months.

(4) Notwithstanding the 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 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 for collecting information, for the enterprise;
  • (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity;
  • (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e),

provided that such activity or, in the case of sub-paragraph (f), the overall activity of the fixed place of business, is of a preparatory or auxiliary character.

(4.1) Paragraph (4) 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) the place or other place constitutes a permanent establishment for the enterprise or the closely related enterprise under the provisions of this Article, 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), a person acting in a Contracting State on behalf of an enterprise of the other Contracting State-other than an agent of an independent status to whom paragraph (6) applies-shall be deemed to be a permanent establishment in the first-mentioned State if:

  • (a) he has in the first-mentioned State a general authority to negotiate and conclude contracts for or on behalf of such enterprise, or
  • (b) he maintains in the first-mentioned State a stock of goods or merchandise from which he regularly sells goods or merchandise for or on behalf of such enterprise.

(5.1) Notwithstanding the provisions of paragraphs (1) and (2) but subject to the provisions of paragraph (6), 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 State in respect of any activities which that person undertakes for 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 (other than a fixed place of business to which paragraph (4.1) would apply), would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

(6) A broker, a commission agent or other agent of genuinely independent status who merely acts as an intermediary between an enterprise of one of the Contracting States and a prospective customer in the other Contracting State shaft not be deemed to be a permanent establishment in that other Contracting State 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.

(7) 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 a company or a permanent establishment of the other.

(8) For the purpose of this Article, a person or enterprise is closely related to an enterprise if one has control of the other or both are under the control of the same persons or enterprises, including if:

  • (a) one possesses directly or indirectly more than 50 per cent of the beneficial interest in the other, or in the case of a company, having 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
  • (b) another person or enterprise possesses directly or indirectly more than 50 per cent of the beneficial interest, or in the case of a company, having 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 or in the two enterprises.