Konzerngesellschaft als Betriebstätte

According to art. 5 par. 7 OECD-MC 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. This regulation seemed to offer a satisfactory and clarifying solution for a long period of time. However, it poses challenging and controversial questions these days. In cases in which a foreign company constitutes a permanent establishment in the state of residence of a subsidiary, the source state claims not only the right to tax the business profits of the subsidiary but also to tax a share of the value-added which the subsidiary creates for the company as a whole.
This dissertation examines if and under what conditions the permanent establishment principle is relevant for associated companies.