Place of business in International Lae

What is a "place of business" in International Law?. The caso of Venezuela.

The Partnership ruling9 mentioned above establishes some important guidelines with respect to the notion of what constitutes a "place of business" for purposes of the PE definition.

As stated above, the case dealt with the treatment of payments from an engineering, procurement and construction (EPC) contract between a Venezuelan partnership ( sociedad en comandita simple, which was the contractor) and a Venezuelan limited liability corporation (the client). The matter under discussion was whether income allocated to the US partner was subject to tax in Venezuela under the USA-Venezuela tax treaty. SENIAT concluded that payments received by the US partner under the EPC contract constituted business profits under article 7 of the tax treaty.

Consequently, the existence of a PE became the central point under analysis.10
Although it does not expressly state so, the wording of the Partnership ruling is a clear indication that SENIAT followed the explanation of the OECD commentary, since the rationale is identical to paragraph 2 of the commentary on article 5, paragraph 1.

In this context, the ruling establishes that the expression "place of business" refers to premises such as a site or in certain cases machinery or equipment.
Another useful guideline with respect to the notion of what constitutes a fixed place of business is contained under SENIAT advisory letter ruling no. DCR-1718-97, dated 5 November 1997. The case referred to the determination of the tax treatment of a lease of shares in a Venezuelan legal entity. SENIAT concluded that the lease income constituted business profits of the non-resident shareholder under article 7 of the Venezuela-UK tax treaty not subject to tax in Venezuela in the absence of a PE. In the reporters' view, SENIAT correctly concluded that the lessor did not have a fixed place of business in Venezuela by virtue of the lease of its stock in a domestic corporation which performed business activities in Venezuela.

Also useful in this respect is ruling no. DCR-5-597 dated 8 July 1998. The case concerned the taxation of payments for the lease of an offshore drilling platform under the UK-Venezuela tax treaty. SENIAT considered that lease payments constituted business profits under article 7 of the treaty. Upon analyzing the facts of the case, SENIAT concluded that the lessor did not have a fixed place of business in Venezuela by virtue of the mere presence of the leased platform. The conclusions under this ruling could be seen as ratification by SENIAT that taxpayers cannot be considered to be carrying out activities in Venezuela through a fixed place of business by the mere location of an asset of its property under a lease agreement.
No further description is available on what constitutes a place of business.

Nevertheless, in the reporters' view it should generally be understood as a distinctive location or site where the business activities of the enterprise may be generally deemed to be carried out.