Under the OECD Model, a PE means "a fixed place of business" through which the business of an enterprise is wholly or partly carried on. A PE includes a place of management, a branch, an office, a factory, a workshop, a mine, oil or gas well, quarry or any other place of extraction of natural resources. A PE can exist despite no premises if the enterprise has space at its disposal. Building sites or construction or installation projects that last more than 12 months are also PE's.

Paragraph 4 lists exclusions -such as facilities used solely for storage, display or delivery of goods. Business carried out solely through a broker, general commission agent or other independent agent will also generally not create a PE.

In contrast, an enterprise is deemed to have a PE if a person-other than an agent of independent status, acting on  its behalf, habitually exercises an authority to conclude contracts in the name of the enterprise, other than activities listed in para 4.