Evolution of the permanent establishment concept under Covid-19

In cross-border transactions, the allocation of the power to tax between taxing jurisdictions over buyers and sellers of tangible or physical goods is crucial. In the pre-internet age, the buyer's and seller's actual geographic location was critical.

Most existing income treaties, which are modeled after the Organization for Economic Cooperation and Development's (OECD) Model Tax Convention on Income and on Capital, state that "an enterprise in one state shall not be subject to a direct tax on its business profits based on net income in the other state unless it carries on business in that other state through a permanent establishment (PE) located in the other state." The OECD treaty cites three types: * a fixed place of business PE such as an office, branch, warehouse or mine site; * a construction or project PE, which is generally a building site or construction or installation that lasts more than a specified length of time (the time period varies per treaty); and * an agency PE through the actions of a dependent agent.