On 1 September, Insurance Europe published its response to the OECD Discussion Draft on Additional Guidance on the Attribution of Profits to Permanent Establishments (PEs). Insurance Europe is concerned that the proposal in its current form will lead to the useless generation of PEs in certain circumstances. Under the proposed PE rules certain insurers would have a PE in a jurisdiction for tax, but not for regulatory, purposes despite the fact that they had no profit attributed to them in that jurisdiction. This would create an unnecessary regulatory burden on these insurers. While the discussion draft recognises that these situations may arise it does not provide a solution.
Insurance Europe’s position is that only the presence of Key Entrepreneurial Risk-Taking (KERT) functions in a jurisdiction (which, for insurers, would be underwriting) should create a PE for tax purposes. It recommends adding some wording to the draft guidance to suggest that the facts and circumstances of the business value chain should be taken into account as part of the determination of whether or not a PE is created.
A link to Insurance Europe’s comment is here.