⚡ Can a server be regarded as a Permanent Establishment (PE) under Article 5th of existing tax treaties?
The tax treaty signed by Curaçao and San Marino on November 20, 2023 (available here: https://shorturl.at/J2789), features in its Art. 5(3)(c) a provision stating that “a server or other type of electronic equipment of an enterprise of a Contracting State located in the other Contracting State” where certain conditions are cumulatively fulfilled is a PE. This mirrors a provision found in the treaty signed by San Marino and Serbia on April 16, 2018 (and in force as of October 8th, 2018) and is similar to other provisions featured in San Marino’s treaty network.
The conditions featured in Art. 5(3)(c) are straightforward: the server (or other type of electronic equipment) must be fixed in the other State, it must be at the disposal of the enterprise, and the business of the enterprise must be wholly or partly carried on through the server. Though uncommon in tax treaties worldwide, this type of provision is discussed by the OECD – OCDE and by the United Nations in the Commentaries to Art. 5th of their Model Conventions.
If you are interested in reading more about the qualification of servers as PEs, see below a list of recommended articles/papers/books from authors in LatAm:
❇ “Analisis Critico del Concepto de Establecimiento Permanente, Presencia Económica Significativa y las Reglas de Atribución de Beneficios en la Era de la Economía Digital” (“Critical Analysis of the Concept of Permanent Establishment, Significant Economic Presence and the Rules of Attribution of Benefits in the Era of the Digital Economy”), by Constanza Rivera Celedón. Available at: https://shorturl.at/EP068 (in Spanish)
❇ “A Necessidade da Definição de um Novo Elemento de Conexão na Caracterização do Estabelecimento Permanente para a Tributação da Renda das Operações de Computação em Nuvem” (“The Need to Define a New Nexus in PE Qualification for the Taxation of Income from Cloud Computing Operations”), by Luana Debatin Tomasi. Available at: https://shorturl.at/cnGZ7 (in Portuguese)
❇ “Desafios na Tributação das Novas Tecnologias: Debates Atuais” (“Challenges in the Taxation of New Technologies: Current Debates”), by Doris Canen. Available at: https://shorturl.at/qwEQ2 (in Portuguese)
❇ “El Concepto de Establecimiento Permanente en la era del Comercio Electrónico y su Incidencia en la Sujeción Pasiva del Impuesto sobre la Renta en Colombia” (“The Concept of Permanent Establishment in the age of Electronic Commerce and its Application in the Taxation of Income in Colombia”), by Mariana Jaramillo Pineda. Available at: https://shorturl.at/brHOP (in Spanish)
❇ “La Tributación de la Economía Digital y sus Efectos en Materia de Impuestos Directos e Indirectos” (“The Taxation of the Digital Economy and its Impacts for Direct and Indirect Taxes”), by Daniel José Otoya Lemaitre and Maria Claudia Llamas Borge. Available at: https://shorturl.at/deyNQ (in Spanish) 🌎
