Note: Unless otherwise indicated, assume that the U.S. Model Income Tax Conventi

Question

Note: Unless otherwise indicated, assume that the U.S. Model Income Tax Convention of
November 15, 2006 (the “Model Treaty”).

USAco, a domestic corporation, decides to expand its sales in country F by hiring a salesperson there. Neither USAco nor the salesperson lease commercial office space in country F. The salesperson makes sales calls while performing the necessary administrative paperwork in her office at her home in F. Under the Model Treaty:

USAco is subject to tax in country F because the salesperson's office constitutes a permanent establishment.

USAco is not subject to tax in country F because the salesperson's office does not constitute a permanent establishment.

USAco is not subject to tax in country F because USAco is not engaged in a trade or business.

None of the above.

USAco is subject to tax in country F because the salesperson's office constitutes a permanent establishment.

USAco is not subject to tax in country F because the salesperson's office does not constitute a permanent establishment.

USAco is not subject to tax in country F because USAco is not engaged in a trade or business.

None of the above.

Explanation / Answer

USA co is subject to tax in country F because the salesperson's office constitutes a permanent establishment. The term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on. The permanent establishment especially includes an office.

In the given case the salesperson makes sales call while performing necessary administrative paperwork in her office at her home in F. This will be considered as fixed place of business and constitute as permanent establishment. Therefore USA co is subject to tax in country F.

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.