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1、ThePermanentEstablishmentIssueinCaseofMovablePlaceofBusinessTurkishSupremeAdministrativeCourtK.2010/32762024/8/24TheCatalogue2024/8/24ConlusionLegal AnalysisIssueBackground Facts Statement The UK Ltd company engaged a Turkey company as an agent, as required by the tourism legislation. This agent pro
2、vided, amongst other things, preparatory services for the expedition and arranged transfers of the tourists to the yachts. The agent was also responsible for piloting services and providing documentation as required by the Turkish authorities.2024/8/24UK Ltd, a company resident in the United Kingdom
3、, carried on touristic yachting operations with its own yachts in Turkish territorial waters. For the facts to be clarified, the touristic yachting service must be described. Such touristic yachting services are comparable to hotel services conducted in hotel buildings for vacation purposes, ie. The
4、 yachting service is not a transportation service or passenger carriage. The tourists stay in the yachts during a sea excursion, which comprises several bays of Turkish coastal area. The excursion starts from and ends at a specific harbour. During the navigation, several bay stops are determined for
5、 anchoring and staying at nights.2024/8/24the UK Ltd rendered its yachting services only to foreign customers. Foreign yachting enterprises, whose commercial transactions effected abroad hat to be represented, and relevant services including documentation and registration transactions related to Tur
6、kish operations had to be supplied by Turkish traval agencies in Turkey. TR AC, a travel agency company, resident in Turkey, supplied the UK Ltd services such as preparatory services for the expedition, transfers of the tourists to the yachts, providing commissaries, pilotage services and documentar
7、y services with the Turkish authorities, etc.2024/8/24 The tax authorities argued that income from touristic yachting services supplied in Turkey to foreign customers with the permission of the Ministry of Tourism was considered to be business income of the UK company subject to corporate income tax
8、 assessable on the permanent representative, a Turkish Travel Agency Company. The Turkish Travel Agency Company argued that neither permanent representative relationship nor a PE existed in Turkey.2024/8/24With regard to domestic Turkish law non-resident companies are subject to corporate income tax
9、 only on income derived from sources in Turkey. A non-resident corporate body is subject to corporate income tax on its “Business profits” if it has a PE or a Permanent representative in Turkey and if it receives corporate income through the PE or permanent representative.http:/ KingdomTurkeyUK Ltdt
10、ouristic yachting servicesTravel agency company PE of the UK Ltd? whether or not the activities of the Turkish company constitutes a PE of the UK company?TheUseofPEsItisverycommonamongtheEUmemberstatestointernallyuseadefinitioncloselyconnectedtothatoftheOECDMTC.TheOrganizationforEconomicCo-operation
11、andDevelopment(OECD)has30membercountries,involvedTurkeyandUnitedkingdom2024/8/24PE-DefinitionArt.5DTC(DoubleTaxConvention)Turkey-UnitedKingdomForthepurposesofthisAgreement,theterm“permanentestablishment”meansafixedplaceofbusinessthroughwhichthebusinessofanenterpriseiswhollyorpartlycarriedon.Inrespec
12、tofaDTC,ifthereisa“Fixedplaceofbusiness”inthesenseofArticle5(1),thereisnolongeranyneedtoreverttoparagraphs5(dependentagents)and6(independentagents)ofthatArticle.Itisonlywhenthefirstandsecondparagraphsrevealthenon-existenceofaPEonaccountoftheabsenceofafixedplaceofbusinessthatparagraph5andparagraph6sh
13、ouldberevertedtoforanexaminationofthecaseundertheagencyaspect.2024/8/24Notwithstandingtheprovisionsofparagraphs(1)and(2)ofthisArticle,whereapersonotherthananagentofindependentstatustowhomparagraph6appliesisactinginaContractingStateonbehalfofanenterpriseoftheotherContractingState,thatenterpriseshallb
14、edeemedtohaveapermanentestablishmentinthefirst-mentionedContractingstateinrespectofanyactivitieswhichthatpersonundertakesfortheenterprise.(Dependentagents)2024/8/24According to the OECD MC For the purposes of this Convention, the term permanent establishment means a fixed place of business through w
15、hich the business of an enterprise is wholly or partly carried on.this definition therefore contains the following conditions: The existence of a “place of business” : A facility such a premises or in certain instances, machinery or equipmentThis place for business must be fixed: it must be establis
16、hed at a distinct place with a certain degree for permanenceThe carrying on of the business of the enterprise through this fixed place of business2024/8/24For a PE to exist there must be a “place of business” which refers to the “physical element of the definition”. The term “place of business” cove
17、rs any premises, facilities, or installations used for carrying on the business of the enterprise whether or not they are used exclusively for that purpose. 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
18、 a certain amount of space at its disposal. A place of business covers all tangible assets used for carrying on business: such as real property, buildings, machines, computers, ships, aircraft and drilling rigs.2024/8/24Thereisnodoubtthatayachtisa“physicalobjectwhichiscommerciallysuitableasthebasiso
19、fabusinessactivity:touristicyachtingoperations.2024/8/24The place of business has to be a “fixed” one: The term has two prongs: (1)the geographical element: a location of the place of business at a specific point. According to the OECD-MC, the term “fixed” refers to a link between the place of busin
20、ess and a specific geographical point. In order to be considered to be “fixed” the equipment must be placed on a “distinct place”: however actual fixation to the soil on which it stands is not required. It is enough that the equipment remains on a particular site. A PE is a specific geographical poi
21、nt or a particular site on the earths surface used in a way going beyond a temporary nature: It is sufficient that a certain place is available for the performance of the activity. Then the question arises here whether a yacht moving a sea excursion between the bays of the turkish territory can be c
22、onsidered to be a “fixed” establishment. 2024/8/242024/8/24Placing yachts in turkish territorial waters within turkish boarders was found to be sufficient. The term fixed should not be understood as referring to dislocation or stability since otherwise many ambulatory business forms might no longer
23、be covered by the concept of PE. The link between the place of business and a particular site and the nature of the activity should be observed under the specific an independent circumstances of each case. Turning to the facts of the case at hand, yachts are placed in territorial waters for an excur
24、sion starting from and finishing at a specific harbour whereby the route and the navigation line are fixed. The yachting operation takes place within a particular and distinct sea site where several bay stops determined for anchoring an staying overnight. The yachts start navigation from a specific
25、harbour, stop in several bays for swimming and night stays and return to the initial harbour to complete the touristic tour.2024/8/24Considering the nature of the business activity, which is not a transportation activity, the navigation route is not comparable to a railway as such, and the yacht its
26、elf does not correspond to a train. However the yacht itself may be considered to be a floating hotel. The operation as a coherent whole is permanent and regular under the explanations provided in the OECD-MC where it is stated: a single place of business will generally be considered to exist where,
27、 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.There is no doubt that the yachts are fixed accounding tothe geographical element.2024
28、/8/24(2) The temporal element A second aspect of the term “fixed” refers to the temporal element of the permanent establishment definition. For a PE to exist, a degree of permanency and regularity is required. The activity should not take place temporarily or occasionally. However, this cannot be un
29、derstood as “everlasting” or “indefinitely continuing”.2024/8/24 As state in the OECD-MC, since the place of business must be fixed: it also follows that a PE can be deemed to exist only if the place of business has a certain degree of permanency, ie if it is not of a purely temporary nature. A plac
30、e of business may, however, constitute a PE even though it exists, in practice, only for a very short period of time because the nature of the business is such that it will only be carried on for a short period of time. 2024/8/24Inthecaseathand,theyachtingactivitiesisaseasonalbusiness.Whentheseasona
31、lcharacterofthebusinessandtherepeatedexcursionsconductedbyyachtsareconsidered,itcanbesaidthatthebusinesscarriedonthroughanorganizedancoherentyachtfleetisaregularoneandtheplaceofbusinessispermanentinnature.Therefore,the yacht is fixed when referring to temporal element 2024/8/24The words “through whi
32、ch” must be given a wide meaning so as to apply to any situation where business activities are carried on at a particular location that is at the disposal of the enterprise for that purpose. Disposal is the power to use the place of business directly; it means a considerable control which may be exe
33、rcised by the taxpayer of his staff. Control might arise from legal control deriving from the ownership or factual control. 2024/8/24In the case at hand the yachts are owned by a non-resident company. The mere fact that the national legislation regulating the yachting operations requires a Ministeri
34、al permission and a representative to be assigned do not change or alter the fact that the non-resident company authorization to use and occupy the yachts to conduct the yachting operation.2024/8/24the existence of a “place of business”physical element: yacht this place of business must be “fixed”ge
35、ographical element: a link between the place of business and a specific geographical point; in light of (the nature of the businesstemporal element: certain degree of permanency yacht moving within Turkish territorial waters the carrying on of the business of the enterprise through this fixed place
36、of business2024/8/24Lower Tax Courts Opinion: In this respect the TR AS does not have a permanent representative statute. In accordance with the relevant DTC which permits the source state taxation if a PE is situated in Turkey, the foreign company conducting its transactions through its travel agen
37、cy TR AS does not have a PE in Turkey. Supreme Administrative court: The contract, between the relevant companies clearly states that there is an agency relationship. Under the Turkish tourism regulations, foreign flagged yachts are not directly permitted to conduct passenger transportation within a
38、nd between Turkish harbours: therefore, the TS AS that undertakes the service and representation responsibility of the yachting operations is clearly in a permanent representative statute. 2024/8/24 The UK company did have a PE in Turkey. Each yacht was used in Turkey, placed Turkey and served Turki
39、sh territorial waters within Turkish borders. Thus, each yacht constituted a PE. In the context of the tax treaty, each yacht met the definition of a PE, as the yachts themselves were the places of business through which the business of the foreign enterprise was carried on and each was fixed on its location with a specific excursion route and sufficiently fixed in duration, taking into account the seasonal nature of the business.2024/8/24OECD常设机构注释OECD官网2024/8/242024/8/24
