PERMANENT ESTABLISHMENT IN THE UNITED STATES: A VIEW THROUGH ARTICLE V OF THE U.S.-CANADA TAX TREATY
By Martin B. Tittle
The last time someone wrote comprehensively about permanent establishment in the United States, the catchwords of the day were Mayaguez, Watergate, and Squeaky Fromme. At that time, there were only nine U.S. cases and thirteen revenue rulings addressing permanent establishment. Perhaps not surprisingly, over a third of those authorities addressed the U.S.-Canada tax treaty.
This book provides a fresh look at "PE in the U.S." using the U.S.-Canada treaty as a case study. It also illustrates a methodology that can be applied to the study of other treaty concepts.
Until September 2007, the treaty with Canada was fairly representative of late-twentieth-century U.S. tax treaties. The protocol signed on September 21 made it cutting-edge in many respects, and the creation of a new "services PE" was one of the innovative changes that Tittle explores in this book.
The book begins with a three-part introduction: first, a brief, general outline of the concept and scope of PE; next, an overview of the individual paragraphs in Article V; and finally, a comparison of the current PE provisions with those in the 1942 U.S.-Canada treaty, to illustrate the limitations presented by older cases and rulings.
Following the introduction are vignettes of ten aspects of U.S. taxation that either underlie the application of treaties or would apply in the absence of a treaty.
Next, every paragraph and subparagraph of Article V is analyzed from three points of view. First, each significant term in the text is defined. (For terms not defined by the treaty, possible definitions from domestic tax law are presented.) Next, the relevant parts of the two model tax treaty authorities -- the OECD Commentaries and the U.S. model technical explanation -- are reviewed and discussed. Finally, relevant cases, rulings, and secondary authorities are presented.
Martin B. Tittle is an international tax attorney who practices in Washington, D.C. and Ann Arbor, Michigan. He graduated magna cum laude from the University of Michigan Law School and has written extensively on international topics for Tax Analysts, BNA, Inter-American Development Bank, Practicing Law Institute, International Bureau of Fiscal Documentation, and the U.S. Congress. His weekly newsletter "U.S. International Tax Outlook" is widely circulated.