Danish Tax Board ruling on PE interpretation

Published: 24 April 2017


The Danish Tax Board (DTB) has issued a decision interpreting permanent establishment (PE) rules. The ruling considered that a sales manager working from home would create a taxable presence for a foreign company as a PE under article 5 of the OECD Model Tax Convention, when the manager’s duties relate to “core business activities”. In the particular case, a German company was providing software and hardware solutions in Denmark and neighbouring countries, and employed a Danish resident sales manager to undertake marketing and customer service activities. The company had no business premises in Denmark and the manager was required under his contract of employment to perform duties from home. The Court found that it was irrelevant to whether the company had a fixed place of business in Denmark that the premises were owned, rented or made available to it. The work carried out by the sales manager at home was deemed “core to the business activities”’ and not merely preparatory or auxiliary (in which case there would be no PE). This decision illustrates how article 5 may be interpreted in Denmark and other jurisdictions in the future in circumstances where it might seem that a PE would not arise.  For further information, please contact Paul Hale or Enrique Clemente.