Edited version of your written advice

Authorisation Number: 1051211541979

Date of advice: 10 April 2016

Ruling

Subject: Does a permanent establishment exist?

Question 1

Do the activities of Company A's employees on board a ship give rise to an Australian permanent establishment of Company A for the purposes of Article 5 of the Double Tax Agreement with Country A?

Answer

Yes.

This ruling applies for the following period:

1 July 201X - 30 June 201X

The scheme commences on:

1 July 201X

Relevant facts and circumstances

1) Company A is a privately owned company which is taxed on a consolidated basis for Country A tax purposes, and is a resident of Country A for treaty purposes.

2) Company A is involved in the design and manufacturing of heavy construction equipment.

3) Company A is also a global service organisation, with employees providing after sales service to companies that have purchased Company A's equipment.

4) Company A signed a Services Agreement with an unrelated third party customer, Company B. The Services Agreement covers many engagements between Companies A and B across the world, and has been amended over time.

5) For each specific engagement under the Services Agreement, Company B creates a 'purchase order' as an addendum to the Services Agreement. The purchase orders clarify the work to be done, the applicable dates of the work and other project specifications. The Services Agreement therefore does not have an end date as such, as work on a particular project/engagement finishes when Company B no longer produces 'purchase orders' for that project.

The Ship

6) Company B owns a vessel named the Ship.

7) The Ship works at various locations depending on the contracts of work that Company B negotiates with its clients. Its itinerary is therefore based on Company B's contracts.

8) Company A manufactured and delivered very large equipment for Company B installed on the Ship. The equipment requires further development of its system software.

9) Company B used the new Company A branded equipment installed on the Ship in Australian territorial waters.

10) The Ship entered Australian territorial waters in mid-late 201X and left in mid 201X.

11) One of the projects covered by the Services Agreement between Company B and Company A is the provision of services by Company A employees in relation to the Company A branded equipment on board the Ship.

12) To protect Company A's intellectual property, Company A retains ownership of the source code of any software, even though Company B acquired a perpetual licence to use the software aboard the Ship. Any improvements made to the equipment software automatically form part of the licence agreement.

The Project

13) In 201X, the Ship started working on a 'Project', an off-shore venture within the territorial waters of Australia.

14) The site of the Project is located off the Australian coast.

15) The Ship was working at the Project site continuously for over 500 days.

16) The activities of the Ship constitute a permanent establishment (PE) of Company B in Australia.

Work Conditions for Company A employees on the Ship

17) At Company B's request, Company A employees would board the Ship and provide support to the Company B crew on matters regarding the Company A branded equipment installed on the Ship. This occurred when the Ship was both inside and outside of Australian territorial waters.

18) In practice, Company A employees on board the Ship would often not know exactly where they were. They boarded the ship, did the work and then disembarked, but where the ship was located was immaterial for their work.

19) Since the Ship entered Australian territorial waters in 201X, approximately X0 Company A employees were on board the Ship in total, with an almost constant minimum occupation of around X Company A employees. The exceptions were as follows:

a. no Company A employees were on board for seven days in mid-late 201X, and

b. no Company A employees were on board for 18 days in early-mid 201X.

20) If no Company A employee was on board when something needed urgent attention, Company A might have received an urgent request resulting in staff being flown to the Ship as quickly as possible.

21) The length of time that a particular Company A employee stayed on board varied significantly depending on the employee and the work required. The shortest stay was two days and the longest stay was 43. There was no general average length of time that a Company A employee was on board the ship.

22) In terms of how the Company A employees were accommodated once on board, they were typically assigned to a bedroom, however there was no expectation of privacy. Sometimes they slept alone, sometimes they shared a room and sometimes they may even have had to sleep in a bed in shifts due to bed shortages. Typically Company A employees were assigned a different bed each time they boarded the ship, and sometimes they may even have been shifted to a different bed during their stay, if more contractors boarded the ship and more beds were required.

23) At the start of each shift, Company A employees did not necessarily report to anyone, as it depended on the task at hand. If they did report to someone, it could occur in various locations, for example, in an office, in a meeting room or at the location of the job itself. A Company A employee may have started a shift in one location, and may have ended the shift somewhere else if called to another task.

24) Company A employees might have been alerted to a job by email, telephone, or if they did not respond sufficiently quickly (or in the case of an emergency), they may have been alerted by radio which broadcasts to the whole ship.

25) Company A employees worked on a time and materials basis, so at the end of the week they would fill in time sheets which the Captain would sign for invoicing purposes.

26) None of the Company A employees worked on the Ship full time.

27) Not all personnel on board the Ship were Company A or Company B staff.

28) Company A would bill Company B for the 12-hour shifts irrespective of any specific maintenance or training or IT services provided during that shift.

29) In principle, while on board the Ship, the Company A employees could only work for Company B as they were billing Company B for their time. In reality, the staff may have done some other work on the side in order to keep occupied.

30) The Company A employees were not provided with a particular space or location on the ship which was for their exclusive use. There is also no space on board the vessel for which Company A employees had the only key, nor has there ever been.

31) While not working (in their down time), Company A employees might have played games, read, or passed the time any way they could. They might have done this in their bedrooms, in the canteen area or in other areas of the ship that were open to contractors (for example, some shared-use offices were available to Company A employees and other contractors on board).

32) In order to work in Australian territorial waters, the Company A employees were employed on relevant Visas. The Visas were generally arranged by Company C, a X based company of the Company A group with a sales PE in Australia, which performs sales support services for the Company A Group in Australia.

33) Company C prepared the relevant Visa sponsorship documents even though Company A was the entity with the contract with the final client, and was responsible for ensuring that Company A employees worked on the Ship.

34) The Company A employees that worked on the Ship were employed by Company A directly or assigned to Company A by Company C.

35) Company A employees last left the Ship in mid-late 201X, when the Ship was in X territorial waters.

Work done by Company A employees on the Ship

36) In relation to the Company A branded equipment installed on the Ship, Company A employees split their time between performing mechanical and IT support.

37) Most of the physical maintenance of the Company A branded equipment on board the Ship was done by Company B staff, although Company A employees may have assisted. However, Company A employees ordinarily focused much more on the software components, as these are much more complex.

38) Company A employees worked in an advisory capacity. At times they may have worked in a supervisory role to Company B staff, they were always supervised by another Company B employee. It was Company B staff who monitored the equipment and alerted the Company A employees in case of any issues.

39) The maintenance equipment used by Company A employees is mainly owned by Company B. Where Company A employees are required to use Company A owned maintenance equipment, such tools and equipment would be stored in the general storage area.

40) The equipment system software is located in the general server room on the Ship.

41) Company B produced X purchase orders for the entire period Company A worked on the Ship while it was in Australian territorial waters.

Relevant legislative provisions

Subsection 6-5(3) of the Income Tax Assessment Act 1997

Section 4 of the International Tax Agreements Act 1953

Section 5 of the International Tax Agreements Act 1953

Article 5 of the Double Tax Agreement with Country A

Reasons for decision

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.

It is not in contention that the income earned by Company A for work done by their employees aboard the Ship while the Ship was within Australian territorial waters is Australian sourced income.

In determining liability to tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaties contained in the International Tax Agreements Act 1953 (Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).

Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Double Tax Agreement with Country A (the Agreement) is listed in section 5 of the Agreements Act.

The Agreement operates to avoid the double taxation of income received by residents of Australia and Country A. Under Article 7 of the Agreement, the business profits of a Country A enterprise shall only be taxable in Country A unless the enterprise carries on business in Australia through a permanent establishment (PE) situated in Australia. If so, so much of the enterprise's profit attributable to the PE in Australia may be taxed in Australia.

Article 5 of the Agreement defines what is a PE for the purposes of the Agreement. On the facts, the relevant paragraph to consider is the first, which provides that the term PE 'means a fixed place of business through which the business of the enterprise is wholly or partly carried on'.

In Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements, the Commissioner accepts that in interpreting the wording of a tax treaty, it is appropriate to have reference to the OECD Commentary on the Model Tax Convention on Income and on Capital 2014 (the OECD Commentary).

Paragraph 2 of the OECD Commentary on Article 5 explains that the Model Convention's definition of 'permanent establishment' contains the following conditions:

● the existence of a “place of business”, i.e. a facility such as premises or, in certain instances, machinery or equipment;

● the place of business must be “fixed”, i.e. it must be established at a distinct place with a certain degree of permanence, and

● the carrying on of the business of the enterprise through this fixed place of business. This means usually that persons who, in one way or another, are dependent on the enterprise (personnel) conduct the business of the enterprise in the State in which the fixed place is situated.

Existence of a place of business

The OECD commentary, at paragraph 4, provides that the term 'place of business' covers 'premises, facilities or installations used for carrying on the business of the enterprise whether or not they are used exclusively for that purpose'. It further provides that:

● [a] “place of business” may also exist where no premises are available or required for carrying on the business of the enterprise and it simply has a certain amount of space at its disposal;

● [i]t is immaterial whether the premises, facilities or installations are owned or rented by or otherwise at the disposal of the enterprise, and

● the place of business may be situated in the business facilities of another enterprise. This may be the case for instance where the foreign enterprise has at its constant disposal certain premises or a part thereof owned by the other enterprise.

The term 'at its disposal' does not appear in the OECD definition itself and is introduced in the OECD Commentary. Paragraph 4.2 states that the mere presence of an enterprise at a location does not necessarily mean that that location is at the disposal of that enterprise. To illustrate this distinction, the OECD Commentary has included several examples where representatives of one enterprise are present in the premises of another enterprise. The most relevant is that contained in paragraph 4.5, which states:

A fourth example is that of a painter who, for two years, spends three days a week in the large office building of its main client. In that case, the presence of the painter in that office building where he is performing the most important functions of his business (i.e. painting) constitute a permanent establishment of that painter.

'At its disposal' has not been judicially considered in Australia, although it has been discussed in the Canadian case Dudney v R 2000 DTC 6169 [2000] 2 C. T. C. 56 (Dudney). The issue in Dudney was whether a non-resident consultant providing services at a client's premises in Canada had a fixed base/PE in Canada. The Federal Court of Appeal (FCA) ruled that in coming to a determination the factors to take into account would include, among other things, whether the person had a legal right to exercise control over that location/space. When reviewing this factor, the FCA put some emphasis on the fact that while Mr. Dudney had access to the offices of the Canadian taxpayer, and did use them, his access was limited to the regular office hours of the Canadian taxpayer. The FCA concluded that Mr. Dudney did not have a fixed base at the client's premises and, consequently, his income was exempt from tax in Canada.

However, the Commissioner addressed this in Taxation Ruling 2002/5 Income tax: Permanent establishment - What is 'a place at or through which [a] person carries on any business' in the definition of permanent establishment in subsection 6(1) of the Income Tax Assessment Act 1936? (TR 2002/5). The domestic definition of a PE is 'a place at or through which the person carries on any business…'. While discussing what may be a 'place', footnote 15 emphasises that control of a site or a lack thereof is not a determinative factor:

….[W]hile the Commissioner accepts that control of a site might indicate a place exists in relation to the person exercising control, and notwithstanding anything contained in the decision of the Canadian Federal Court of Appeal in Dudney v R 2000 DTC 6169, [2000] 2 C.T.C. 56, the lack of control by a person of an area does not mean that that area is not a place for the purposes of the definition of PE in relation to that person…

This issue was addressed in ATOID 2006/9 Taxation of income of non-resident performing independent personal services: fixed base - the 1967 UK Agreement (ATOID 2006/9). The question at issue turned on whether an enterprise carried on business through a PE in Australia. Although the ATOID references the former tax treaty between Australia and the UK and hence has since been withdrawn, to the extent the former and current OECD treaty Articles and Commentaries are similar, it may provide some guidance on the interpretation of the Agreement.

The facts were that a non-resident, who carried on a design business in the UK, negotiated a contract to provide design services to an Australian company. The contract was negotiated and concluded in the UK, and the non-resident initially worked from their UK home office. The non-resident then travelled to Australia where they worked continuously for 111 days, at space made available to them within a studio. For the duration of the contract, the non-resident provided services solely to that client. In relation to the 'space' within the studio, the facts provide:

The space made available each time the taxpayer provided the services was merely an area within the studio not already in use at that particular point in time. The space made available was not a specifically defined area within the studio, such as an office or other such room, nor was it the same space on all occasions.

In coming to a decision, the writer refers to Articles 7 and 5 of the OECD Model Tax Convention, as published on 28 January 2003, and relied on the accompanying OECD Commentary published on the same date to aid in interpretation. To the extent they were quoted, those Articles and Commentaries are the same as the current OECD Model Convention 2014. That is, the ATOID provides:

Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model explains that the definition provides three conditions necessary for a permanent establishment to exist:

● There must be a place of business

● The place of business must be fixed so that there is a distinct location with a certain degree of geographical and temporal permanence; and

● The business of the enterprise must be conducted through that fixed place.

In assessing whether there was a 'place of business', the writer notes that paragraph 4.1 of the Commentary states that the fact that 'an enterprise has a certain amount of space at its disposal which is used for business activities is sufficient to constitute a place of business'. On this point they then conclude:

The space made available to the taxpayer when providing the services under the contract falls within the meaning of paragraph 4 of the OECD Commentary referred to above.

It was ultimately concluded that a PE did not exist (due to a lack of temporal permanence).

The place of business must be 'fixed'

The OECD Commentary also provides guidance on what is required for the 'place of business' to be considered 'fixed' both geographically and temporally. Given that on the facts, the 'place of business' is inherently mobile, it is worthwhile reproducing the relevant Commentary in full. Paragraph 5 explains that:

…there has to be a link between the place of business and a specific geographical point. It is immaterial how long an enterprise of a Contracting State operates in the other Contracting State if it does not do so at a distinct place, but this does not mean that the equipment constituting the place of business has to be actually fixed to the soil on which it stands. It is enough that the equipment remains on a particular site.

Where the nature of the business activities carried on by an enterprise is such that these activities are often moved between neighbouring locations, there may be difficulties in determining whether there is a single “place of business”… As recognised in paragraphs 18 and 20 below a single place of business will generally be considered to exist where, in light of the nature of the business, a particular location within which the activities are moved may be identified as constituting a coherent whole commercially and geographically with respect to that business.

This principle may be illustrated by examples. A mine clearly constitutes a single place of business even though business activities may move from one location to another in what may be a very large mine as it constitutes a single geographical and commercial unit as concerns the mining business.

By contrast, where there is no commercial coherence, the fact that activities may be carried on within a limited geographic area should not result in that area being considered as a single place of business. For example, where a painter works successively under a series of unrelated contracts for a number of unrelated clients in a large office building so that it cannot be said that there is one single project for repainting the building, the building should not be regarded as a single place of business for the purpose of that work.

However, in the different example of a painter who, under a single contract, undertakes work throughout a building for a single client, this constitutes a single project for that painter and the building as a whole can then be regarded as a single place of business for the purpose of that work as it would then constitute a coherent whole commercially and geographically.

As mentioned previously, TR 2002/5 provides guidance on the domestic definition of a PE in subsection 6(1) of the ITAA 1936, in which a PE is defined as 'a place at or through which the person carries on any business…'. The Commissioner does not consider it significant that the word 'fixed' does not appear in that definition (paragraph 19), stating it should be construed in a way that is broadly consistent with the meaning of PE in Australia's tax treaties (paragraph 27). The Commissioner goes on to say that that approach is facilitated by including the concept of permanence in both its geographical and temporal senses. To that end, TR 2002/5 may provide some guidance on the meaning of 'fixed' in Article 5 of the Agreement.

Paragraph 29 of TR 2002/5 states that a place at or through which a person carries on any business in the context of a PE definition 'must be geographically permanent'. However, it further states:

Any area, viewed commercially and as a whole, may, in relation to the business concerned, be a place.

The example provided is that of a market stall holder who sets up their stall in different places within the market at different times.

It is the market which is, in relation to the trader, the distinct or discrete commercial area and it is therefore a place (and a place at or through which the trader carries on their business) within the definition of PE in subsection 6(1).

To the extent it relates to geographic permanence, the example in paragraph 39 may be relevant to the facts of this case. The example is of a theatrical company touring Australia to perform one off shows at numerous towns over four months. The company has separate performance contracts with each venue. Because of the itinerant nature of the activity in Australia, the company does not have a place at or through which it carries on business for the purposes of the definition of PE in subsection 6(1) in a geographic or temporal sense.

In terms of the temporal aspect of permanence, the OECD Commentary provides (from paragraph 6), that a PE can only be deemed to exist if the place of business is not of a purely temporary nature. While the Commentary makes it clear that there is no specific rule, 'experience has shown that permanent establishments normally have not been considered to exist in situations where a business had been carried on in a country through a place of business that was maintained for less than six months'. An exception to this is where the activities were recurrent and the amount of time could potentially be considered cumulatively depending on the number of years in which the place was used.

This is reiterated in TR 2002/5 where paragraph 33 states that the existence of temporal permanence is a matter of fact and degree, however as a guide, 'if a business operates at or through a place continuously for six months or more that place will be temporally permanent'.

Although not an Australian case, the Indian case of Fugro Engineering B.V. v. ACIT (2009) 122 TTJ (Del) 655: (2008) 26 SOT 78: (2009) 21 DTR 224 examined a similar issue under Article 5(1) of the Convention between the Kingdom of the Netherlands and the Republic of India. In that case, a Dutch engineering company earned income under three separate contracts for work undertaken by its own staff on its own vessel, or by its staff on a contractor's vessel. All three contracts were performed in the territorial waters of India, and in one case, partly on land, and partly on a ship, taking 91 days to complete in total. After referring to the OECD Commentaries, the ITAT Delhi 'C' Bench ruled that a ship is a fixed place of business despite its moving along the site of work, and that therefore a PE existed.

The carrying on of the business of the enterprise through the fixed place of business

In relation to this last point, the OECD Commentary provides little guidance. It simply says, at paragraph 7, for a place of business to constitute a PE, the enterprise using it must carry on its business wholly or partly through it. Importantly, it adds that the activity need not be permanent in the sense that there is no interruption of operation, but that operations must be carried out on a regular basis.

Is the Ship a place of business?

The OECD Commentary takes a fairly wide interpretation of what may constitute a place of business. It can include, for example, a place of business which is in the business facilities of another enterprise, and those facilities need not be used exclusively for its business, provided the relevant worker/s must have 'a certain amount of space at its disposal'.

What it means for the employees to have premises 'at their disposal' is not clearly defined. However the OECD Commentary provides some illustrative examples. The example which is most relevant to Company A is that of a painter who attends a building three days a week to perform a contract. Although he works at different places all over the building, the Commentary suggests that because he performs the most important functions of his work under a single contract with the same employer, the premises are at their disposal.

Added to this is the Commissioner's acceptance in TR 2002/5, that lack of control by a person of an area, does not mean that that area is not a place for the purposes of the definition of PE.

Further, the decision made in ATOID 2006/9 included that the space made available to the non-resident in the studio was sufficient to fall within the meaning of paragraph four of the OECD Commentary. The space was merely an area not already in use at that particular point in time, it was not specifically defined within the studio, nor was it the same space on all occasions. Yet, that scenario was sufficient for the enterprise to have a certain amount of space at its disposal.

The following factors support the contention that the Ship was at the disposal of Company A's employees:

● the Company A employees were aboard the Ship because of one overarching contract, the Services Agreement, with a single customer, Company B; (see the painter's example)

● Company B only created X 'purchase order/s' as an addendum to the Services Agreement over a XXX day period, containing what work the Company A employees were to do aboard the Ship, and essentially meant that their work for Company B was on a rolling, continual basis

● it is immaterial that the employees worked in different areas of the ship and not in one single location aboard the ship (see the painter's example and ATOID 2006/9)

● there were almost always X Company A employees present on the Ship, so it was very consistent, regular work

● the cumulative 25 days out of 561 days when there were no Company A employees on board is considered negligible

● the Company A employees work in advisory positions to Company B employees, even though they are always supervised by a Company B employee

● the Company A employees being aboard the Ship are essential to the taxpayer performing its obligations under the Services Agreement with Company B

● unlike the painter, Company A employees cannot leave the Ship when they finish a shift, so actually have more access to the place where they perform their business activities than the painter.

The following factors do not support the contention that the Ship was at the disposal of the Company A employees:

● the Company A employees do not have a specific space which they alone can access via a key.

Not all of the above factors have the same weight. On balance, the Commissioner considers that the regularity and consistency with which the Company A employees were working aboard the Ship, the importance of the work they provided to the Company B crew, coupled with their freedom aboard the Ship, means that they had the Ship at their disposal for the purposes of determining whether it can be a place of business. The Ship is therefore a place of business for the Company A employees providing services to Company B.

Is the place of business 'fixed'?

The OECD Commentary provides guidance on what is required for the 'place of business' to be considered 'fixed' both geographically and temporally. It is not in dispute that the Company A employees worked aboard the Ship within Australian territorial waters for significantly longer than 6 months, and that therefore the temporal requirement for permanency is met.

In terms of geographic permanence, the OECD Commentary is clear that while there has to be a link between the place of business and a specific geographical point, the premises do not have to be actually 'fixed to the soil on which it stands'. It is sufficient if the equipment remains on a particular site. Where the nature of the business means that a particular location within which the activities are moved may be identified as constituting a 'coherent whole commercially and geographically' with respect to that business, a single place of business will be considered to exist.

Paragraph 29 of TR 2002/5 reiterates this by stating that, while a place at or through which a person carries on any business in the context of the definition of PE in subsection 6(1) 'must be geographically permanent', '[a]ny area, viewed commercially and as a whole, may, in relation to the business concerned, be a place'.

On the facts, it is not immediately obvious whether it is necessary to determine whether a 'fixed place' exists aboard the Ship or whether there is a 'fixed place' in which the Ship operates.

In terms of the former, the Commissioner does not consider it appropriate to determine whether Company A employees have a 'fixed place' aboard the Ship. In order to determine taxing rights under the Agreement, geographic location is essential. However, in the circumstances of this case, the place of business was the ship. Consequently, the better question is whether the ship moved within a space which may be identified as constituting a 'coherent whole commercially and geographically'.

The OECD Commentary states that a mine is a clear example of what may constitute a single place of business because it is a single geographical and commercial unit as concerns the mining business. Paragraph 29 of TR 2002/5 states '[a]ny area, viewed commercially and as a whole, may, in relation to the business concerned, be a place'.

In 201X, Company B started working on the 'Project', an off-shore venture within the territorial waters of Australia. In doing so they moved the Ship into the Project Site. Accordingly the Project has a defined geographical area.

Although it is unclear from the records supplied by Company B, it appears the Ship stayed within the Project Site from mid-late 201X to early-mid 201X, before eventually moving to X. The Ship moved solely within the Project Site while in Australian territorial waters. Accordingly, the Ship moved within a defined geographical area during that time period.

Although Company A employees worked aboard the Ship both inside and outside of Australian territorial waters, one of the first places Company B used the new Company A branded equipment installed on the Ship was in Australian territorial waters in the Project Site in mid-late 201X. The Ship left the Project Site in early-mid 201X. Company A stopped working aboard the Ship in mid-late 201X. Therefore, the bulk of the time Company A employees were aboard the Ship, it was within the Project site.

During this period, the Company A employees worked under one overarching agreement between Company A and Company B, and more specifically under X successive related purchase orders for the same customer, Company B. That is, for the entire time the Company A employees were within the defined geographic area of the Project site, they were working for the same customer, doing the same work.

This supports an argument that the Company A employees aboard the Ship were moving in a coherent geographic and commercial area for the purposes of the work they were doing under the Agreement. That is, the Company A employees aboard the Ship were contracted to support Company B staff, and the Company B staff were in the Project site. In these circumstances, the relevant space the Ship traversed had both geographic and commercial significance to Company A's business with Company B under the Services Agreement.

In conclusion, the Commissioner considers the Ship to be a fixed place of business both geographically and temporally, for the purposes of the Company A employees aboard while it was in Australian territorial waters.

Is the carrying on of the business of the enterprise through the fixed place of business?

Paragraph 7 of the OECD Commentary provides that for a place of business to constitute a PE, the enterprise using it must carry on its business wholly or partly through it. It adds that the activity need not be permanent in the sense that there is no interruption of operation, but that operations must be carried out on a regular basis.

The Commissioner considers that Company A carried on its business under the Services Agreement wholly or partly through the place of business, the Ship.

Conclusion

Article 5 of the Agreement relevantly defines a PE for the purposes of the Agreement as meaning 'a fixed place of business through which the business of the enterprise is wholly or partly carried on'.

The Commissioner considers that on balance, the activities of the Company A employees aboard the Ship within the relevant period gave rise to a PE because the following conditions were met:

● the Ship was a place of business;

● the place of business was fixed, and

● Company A carried on of the business of the enterprise through this fixed place of business.