The highly anticipated Dell Products-case was recently decided by the Supreme Court of Norway in favour of the taxpayer. The Court ruled that an ordinary ‘commissionaire’ agent cannot be regarded as a permanent establishment of its foreign principal where it does not have the legal right to conclude contracts in the name of its principal. The decision thus follows in the footsteps of the similar Zimmer-judgment in France and could provide good guidance for all countries in which ’commissionaire’ structures are recognised.
Many continental legal systems are familiar with the concept of a commissionaire agent, who acts in its own name, but on behalf of its principal.
Dell AS, a Norwegian company, was acting as such a ‘commissionaire’ agent on behalf of Dell Products, its principal tax resident in Ireland. Dell AS was thus selling the computer products of Dell Products to private companies in Norway under the brand ‘Dell’ – i.e. without the buyers being aware that they were buying the computers of Dell Products. This arrangement was fully in accordance with the Norwegian law on ‘commissionaire’ agents. It was thus not disputed that Dell AS did not have a legal right to bind its principal vis-à-vis third parties (the buyers). It was neither disputed that Dell AS was economically reliant on its principal, meaning that it had to be considered as a ‘dependent agent’ within the meaning of Art. 5 (5) of the Irish-Norwegian double tax treaty (being completely identical with the relevant provision of the OECD Model Tax Convention).
Despite there being no legal right of Dell AS to conclude contracts on behalf of its principal, the Norwegian tax authority held that, in reality, the agent was actually concluding contracts on its behalf. As such, according to the Norwegian tax authority, Dell AS, the dependent agent, must be regarded as a permanent establishment of Dell Products.
The thoroughness with which the Norwegian Supreme Court considered the case could serve as an example to many other courts throughout Europe. It considered not only the wording of the relevant double tax treaty, the OECD Model Tax Convention, and the OECD Commentaries; but also the relevant practice of other countries, with special emphasis on the Zimmer-judgment that was passed by the Conseil d’Etat in France in 2010 against a highly similar factual background.
The Norwegian Supreme Court concluded that none of the above suggested that a dependent agent could be a permanent establishment of its principal where it was acting as a real ‘commissionaire’ agent. The Court therefore did not even examine the criteria which were necessary to conclude contracts ‘in reality’ as stated by the tax authority.
The Dell Products judgment could now perhaps be regarded as showing a tendency towards a more uniform interpretation of ‘commissionaire’ structures, especially given its consideration of and explicit reference to the French Zimmer-judgment. It remains to be seen whether the future changes to the OECD Commentaries are ready to confirm this approach.
Law: Dell Products vs. Staten v/Skatt øst, Norges Høyesterett, HR-2011-2245-A (sak nr. 2011/755), 2 December 2011.
Stéphane Gelin, partner, CMS Bureau Francis Lefebvre
Tamás Fehér, Associate, CMS Cameron McKenna