The Guidance notes that it is unlikely that the COVID-19 situation will create any changes to an entity’s residence status under a tax treaty.
The OECD Secretariat has issued guidance on the impact of the COVID-19 crisis on key international tax issues.
The guidance, issued on April 3, is based on a careful analysis of the international tax treaty rules.
The guidance addresses concerns related to the creation of permanent establishments, the residence status of a company (place of effective management), and concerns related to cross border workers and change to the residence status of individuals.
The guidance notes that it is unlikely that the COVID-19 situation will create any changes to a permanent establishment determination.
The guidance states: “The exceptional and temporary change of the location where employees exercise their employment because of the COVID-19 crisis, such as working from home, should not create new permanent establishments for the employer.”
“Similarly, the temporary conclusion of contracts in the home of employees or agents because of the COVID-19 crisis should not create permanent establishments for the businesses.”
The guidance further adds that a “construction site permanent establishment would not be regarded as ceasing to exist when would is temporarily interrupted.”
As regards the residence status of companies, the guidance notes that it is unlikely that the COVID-19 situation will create any changes to an entity’s residence status under a tax treaty.
“A temporary change in location of the chief executive officers and other senior executives is an extraordinary and temporary situation due to the COVID-19 crisis and such change of location should not trigger a change in residency, especially once the tie breaker rule contained in tax treaties is applied,” the guidance notes.
The full guidance is available on the OECD’s website.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com