Oil & gas, infra firms to be hit by PE norms

MNCs sometimes split EPC contracts to stay below PE threshold; PE threshold varies for tax treaties between different countries

Oil and gas, power and other infra sector companies will be the most impacted by the change in norms of permanent establishment (PE), post-India’s recent signing of the multilateral instrument (MLI) as part of measures to prevent base erosion and profit shifting. 

Article 14 of the MLI provides for the criteria to determine whether time thresholds in a tax treaty for construction, installation, supervisory have exceeded the time after which a particular project or an activity will be treated as permanent establishment (PE). Tax is imposed on entities if they have a PE in the operating country.

At present, it