Developments in relation to taxable presence in case of cross border activities

By Willem Bongaerts, Rik van de Meerendonk


The tax world is changing, that is for sure. In this decade, many of the tax structures and concepts we used to work on for many years, will change. Also for our clients that are using a commissionaire-structure (principal and commission or agent) for their worldwide sales and clients that are active in distribution and supply of goods their structure will be impacted by this change. In this tax update, we will provide you with some information on the changes for these companies.


Often companies use a commissionaire-structure for their global activities. In short, a commissionaire-structure is e.g. an arrangement through which a person/company (the commissionaire) sells in a certain country products in its own name but on behalf of a foreign enterprise that owns the products (the principal). By making use of the commissionaire, the principal can sell its products in foreign jurisdictions without creating a taxable permanent establishment in such foreign jurisdiction, while the commissionaire only receives a minimal remuneration for the activities performed (the commission).

BEPS action 7 states that in many cases such commissionaire arrangements and similar strategies were put in place to erode the taxable basis in countries where sales took place. It therefore proposes to amend the wording of article 5, paragraph 5, of the OECD Model Convention (OECD MC) and the commentary thereto. The amendments are aimed at a.o. tackling commissionaire structures, i.e. resulting in a (taxable) permanent establishment for the principal in the foreign jurisdiction where the commissionaire conducts its activities.

Reference is made to Section A of the BEPS action 7 report as published by the OECD on October 5, 2015.

Distribution/supply of goods

Many companies have their own warehouses and distribution facilities where they store and from which they ship goods to their customers. Especially the Netherlands and Belgium are, given their central position within Europe and the Rotterdam and Antwerp harbors, often used as location for European-warehouse and distribution facilities. These locations can be used to store goods and even show them to (potential) customers. For many years, such sites were not regarded as a taxable presence/permanent establishment. Therefore, there was no corporate income tax obligation (also no filing requirement). The tax treaties (based on OECD MC) deliberately exempted this. The carve out was based on article 5, paragraph 4, of the OECD MC.

Now with BEPS action 7, this exemption can disappear, and a taxable presence may result. Aforementioned can for instance already be the case due to activities performed by a related company in the same country. In principle this does not have to lead to substantial problems, however it should be addressed and the tax reporting should take this into account in order to avoid double taxation and penalties.

Reference is made to Section B of the above mentioned BEPS action 7 report ad published by the OECD on October 5, 2015.