458 BULLETIN FOR INTERNATIONAL TAXATION AUGUST 2016 © IBFD The Spanish Position on the Concept of a Permanent Establishment: Anticipating BEPS, beyond BEPS or Simply a Wrong Interpretation of Article 5 of the OECD Model? In this article, the author considers the Spanish position regarding the concept of a permanent establishment and whether the Spanish concept conforms to the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative or is simply an erroneous interpretation of the provisions of article 5 of the OECD Model. 1. Introduction One of the primary objectives of an International Fiscal Association (IFA) issue of the Bulletin for International Taxation is to provide an overview of main tax issues or special tax features of the country in which the IFA Con- gress takes place, in the current case in Madrid in Septem- ber 2016. As the reader may anticipate from the question in the title of this article, there are peculiarities regard- ing the Spanish interpretation of the concept of a per- manent establishment (PE), which are examined in this article. What the article intends to demonstrate is that these peculiarities, strange as they may seem, 1 cannot simply be discarded with a simple answer to the question by saying that “Spain is different”. Rather the interpretation of the concept of a PE was, and still is, a “defensive” mech- * Professor of Tax Law, University of Cádiz, Spain, Jean Monnet Chair EU Commission. he author can be contacted at adolfo.martin@uca. es. his article is a revised and integrated version of the following two works of the author: A.J. Martín Jiménez, he Spanish Position on the Concept of PE: he Supreme Court Judgment of 18 June 2014, “Complex Operative Settlements” and “Industrial Dependent Agents” as PEs, in Tax Treaty Case Law around the Globe 2014 (M. Lang et al. eds., IBFD/Linde 2015), Online Books IBFD and he Spanish Saga on PE Concept: he Dell Decision by the Audiencia Nacional on “Commissionaire” and “Dependent Subsidiaries”, a paper presented at the Conference “Tax Treaty Case Law around the Globe 2015”, orga- nized by the Universities of Tilburg and Vienna, Tilburg (20-21 May 2016). 1. On international reactions to the PE interpretation by Spanish tax administration and courts, see, for example, D.P. Sengupta, Countering Base Erosion Through Finding a PE, taxindiainternational.com, available at www.taxindiainternational.com/columnDesc.php (2013) (accessed 28 Apr. 2016), who refers to ES: TS, 12 Jan. 2012, Rec. No. 1626/2008 (Roche), Tax Treaty Case Law IBFD and ES: AN, 8 June 2015, Rec. No. 182/2012 (Dell Spain) in Spain to demonstrate that there is one tax administration in the world that is more “creative” than the Indian one in finding a PE; B. Obuoforibo, In the Name of Clarity: Defining a Dependent Agent Permanent Establishment, in Taxation of Business Profits in the 21st Century – Selected Issues under Tax Treaties sec. 3.4.2. (C. Gutiérrez & A. Perdelwitz eds., IBFD 2013), Online Books IBFD, who typifies these cases as “Spain goes its own way”; and G. Sprague, (2012), Spanish Supreme Court Gores Taxpayer After Business Restructuring, BNA (2012), available at www.bna.com/spanish-supreme-court-n12884909108 (accessed 28 Apr. 2016), who speaks of “Spanish Court gores the taxpayer”. anism on the part of Spain to some of the structures that the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative 2 is trying to eliminate. It is true that this response is unfortunate in the terms that are considered in this article, but it is probably not as unfounded, in substance, although not in form, as it may appear at first sight. It has errors and these must be criticized, but, ultimately, this is yet another reaction with regard to international taxation, probably less aggressive, for example, than the United Kingdom’ s diverted profits tax (DPT) 3 or the Turkish electronic place of business PE, 4 or, in the vein of other initiatives, for example, the proposed Indian equalization levy on internet advertis- ing 5 or the new Australian “multinational anti-avoidance law” (MAAL), 6 in that it reflects the sense of dissatisfac- tion in some countries with the PE threshold in article 5 of the OECD Model. 7 Consequently, the primary objective of this article is to put into perspective the Spanish inter- pretation of the concept of a PE, which is moving in the direction of the OECD/G20 BEPS initiative and, in many ways, even goes beyond this, to arrive at a more balanced 2. OECD, Action 7 Final Report 2015 – Preventing the Artificial Avoidance of Permanent Establishment Status (OECD 2015), International Organiza- tions’ Documentation IBFD and Actions 8-10 Final Report 2015 – Aligning Transfer Pricing Outcomes with Value Creation (OECD 2015), Interna- tional Organizations’ Documentation IBFD. 3. For the United Kingdom’ s DPT, see R.T. Santos, The United Kingdom’ s Diverted Profits Tax and Tax Treaties: An Evaluation, 70 Bull. Intl. Taxn. 7 (2016), Journals IBFD. 4. See A. Devranoglu, Turkey Introduces Electronic Place of Business Concept”, Intl. Tax Rev. (25 Apr. 2016), available at www.internationaltaxreview. com/Article/3548543/Turkey-introduces-electronic-place-of-business- concept.html?utm_source=Compliance%20Management&utm_mediu m=email%20editorial&utm_content=Editorial&utm_campaign=63596 8432652711823&utm_term=Turkey%20introduces%20%u2018electron ic%20place%20of%20business%u2019%20concept (accessed 28 Apr. 2016). 5. On this levy, see D.P. Sengupta, The Indian Equalisation Levy, taxindiain- ternational.com (2016), available at http://www.taxindiainternational. com/columnDesc.php?qwer43fcxzt=MjQ1 (accessed 28 Apr. 2016) and A. Mehta, “Equalization Levy” Proposal in Indian Finance Bill 2016: Is It Legitimate Tax Policy or an Attempt of Treaty Dodging?, 22 Asia-Pac. Tax Bull. 2 (2016), Journals IBFD. 6. For an official explanation of the new Australian provision that is designed to counter the schemes adopted by multinational enterprises (MNEs) to limit their taxable presence in Australian, see the official guide of how the Australian Tax Office (ATO) intends to apply the MAAL, available at www.ato.gov.au/law/view/pdf/psr/lcg2015-002.pdf. 7. OECD Model Tax Convention on Income and on Capital (26 July 2014), Models IBFD. Adolfo J. Martín Jiménez* Spain Exported / Printed on 12 Sep. 2016 by adolfo.martin@uca.es.