1.           Introduction

Art. 5(1) in the most contemporary tax treaties defines a "permanent establishment" to mean a "fixed place of business through which the business of an enterprise is wholly or partly carried on."

For a place of business to be regarded as “fixed” for existence of a permanent establishment under Art. 5(1) of a tax treaty, it must have certain ‘degree of permanence’. This prerequisite is referred to as the ‘duration test’.

Often, a foreign enterprise is not regarded as having a fixed place permanent establishment under Art. 5(1) of a tax treaty unless the duration of its activities at a place of business in the source state exceeds the six-month threshold. [See paragraph 28 in the 2017 update to the OECD Commentary to Art. 5 of the OECD Model Convention.] But occasionally, a 12-month period has been considered as the time threshold for existence of a fixed place permanent establishment. In some cases, as discussed in this article, courts have accepted even less than six months as the time threshold. Hence, the duration test is one of the more intricate prerequisites for existence of a fixed place permanent establishment.

This article takes into account precedents from Austria, the Czech Republic, India, Italy, the Netherlands, New Zealand, and the United States.