The Implementation of the “Authorized OECD Approach” under German Law and its Relation to Already Existing Double Tax Conventions – Can the “Authorized OECD Approach” be Applied Retrospectively?
AbstractThe attribution of profits to PEs has become increasingly complex during the last years and it is expected to become even more complex in the future. This increased complexity can, inter alia, be attributed to the introduction of the “Authorized OECD Approach” in 2010. The AOA is a method for attributing profits to PEs in two steps and was meant to facilitate the international profit attribution to PEs. The intention of the OECD was to achieve a higher level of legal certainty and to harmonize the differing rules on profit attribution to PEs in the OECD countries. Another reason for the implementation of the AOA brought forward by the OECD was the avoidance of double taxation and double non-taxation arising from divergent rules on profit allocations to PEs. However, the AOA was highly disputed and it is noticeable that it is not accepted as an appropriate approach to attribute profits to PEs in the United Nations Model Double Taxation Convention (DTC). Even the OECD accepted the introduction of this approach by majority vote only. This implies that there is no international consensus on the application of the AOA. While it is expected to result in problems in international co-operations, it is also expected to lead to complications in national law since it is built up on fictions that are difficult to determine for tax law practitioners.