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It should be noted, however, that while the OECD Model approach is favoured by these jurisdictions, no country's tax treaty practice invariably reflects this approach. All jurisdictions have at least a few treaties that provide for source taxation of services income in the absence of a fixed place of business. Typically, such treaties deem the provision of services over a specified period to constitute a PE in some circumstances (sendees PE). Although the OECD Model approach reflects the preference of the majority of its members, most countries are prepared to provide additional source taxing rights over income from services through the inclusion of a services PE in treaties with certain jurisdictions. Some countries that prefer the OECD Model approach will only rarely include services PEs (e.g. in treaties with developing countries or economies in transition), while others appear to have a more flexible approach, which results in a larger proportion of their treaties including such provisions.

A number of OECD and other countries that generally follow the fixed place of business threshold reserve the right to depart from this principle in respect of certain types of services activities, e.g. natural resource activities, planning, supervisory or consultancy activities in connection with a building site  operation or leasing of equipment. insurance activities or independent personal or professional services

An exception to the rule in paragraph 1 is found in paragraph 3, which provides that a building site or construction or installation project constitutes a PE only if it lasts longer than 12 months. The OECD view is that the 12-month time threshold is a further threshold condition that must be met in addition to the fixed place of business requirement. However, the 2011 update to the UN Commentary notes that

“there are differing views about whether paragraph 3(a) is a ‘self-standing' provision (so that no resort to paragraph 1 is required) or whether (in contrast) only building sites and the like that meet the criteria of paragraph 1 would constitute permanent establishments, subject to there being a specific six months time test. However, the Committee considers that where a building site exists for six months, it will in practice almost invariably also meet the requirements of paragraph 1. Indeed, an enterprise having a building site etc at its disposal through which its activities are wholly or partly carried on v/ill also meet the criteria of paragraph 1.”

Even among OECD countries, the 12-month threshold for construction sites and projects is not universally supported. Nine OECD countries reserve the right to treat a construction site or project as a PE if the activities last more than 6 months. Outside the OECD, it would appear that few countries adopt the 12-month threshold for these activities.

Since 2000 the OECD Model has not included a separate provision dealing with independent personal services. Nevertheless. Article 14, Independent Personal Services, is still found in many existing treaties of OECD countries. Since Article 14, as it was in the OECD Model, used the “fixed base” threshold for source taxation, and the concept of “fixed base" is considered to be the same as the fixed place of business concept used in the PE definition, the treatment of income from independent personal services under those treaties that included OECD Model Article 14 is generally no different from that of income from services that is dealt with under Article 7.


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