2. FORco, a foreign corporation, sells widgets in the U.S. via mail order. FORco

Question

2. FORco, a foreign corporation, sells widgets in the U.S. via mail order. FORco has distribution facilities in New York, Chicago and Los Angeles. The facilities’ store- front is a showcase that displays samples of FORco’s various lines of widgets. The rest of each facility contains two offices and a storage area. FORco staffs the first office with an individual whose sole function is to collect information regarding potential customers. FORco staffs the second office with an individual whose sole purpose is to locate and purchase materials that FORco needs to manufacture widgets. The storage space is used exclusively for the storage of widgets in route to customers. Under the U.S. Model Treaty, does FORco have a permanent establishment in the U.S.? Explain.

Explanation / Answer

Yes forco is having permanent establishment in US as per the U.S. Model treaty. The following is the reasons:

As the place of management is available in Los angels, by way of storage space to used to keep the material for manufacturing widgets and route the same to customers. As one of the condition for permanent establishment is the place of management. So forco is having permanent establishment in U.S.

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