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The OECD BEPS project recommended that the presence of a permanent Establishment (PE) required under most double tax treaties to give taxing rights to a host country should be determined by taking into account certain activities in that country of related businesses. These changes to the PE threshold could apply in situations that multinationals may not expect. 

The proposed changes to the PE definition can be applied under a new treaty or through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI), potentially under an existing treaty.

International groups should review their existing supply chains and operating models and determine whether the new anti-fragmentation rules might apply and result in unexpected PEs.

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