THE Norwegian Supreme Court has recently settled the issue of PE in favour of Dell. The highest court has ruled that a PE in accordance with article 5(5) of the OECD Model Treaty (agency PE article) can arise only in cases in which a dependent agent can legally bind its principal.

The case revolved around the issue of whether Dell products, a Dutch company resident in Ireland, had a PE in Norway by virtue of its marketing activities. Dell AS was established as a commissionaire company to market and sell Dell products in the Norwegian market under its own name, but for the risk and account of an Irish tax resident principal (Dell Products Ltd). The Norwegian tax authorities took the position that Dell AS constituted a PE of Dell Products Ltd under article 5(5) of the Norway-Ireland tax treaty and, hence, that a significant proportion of the Norwegian-source distribution profits of the Irish entity should be liable to Norwegian tax, rather than just the commission fee received by Dell AS. Dell AS argued that a PE only existed under the Norway-Ireland treaty to the extent Dell AS could legally bind Dell Products Ltd.