Alinea 89 Parket bij de Hoge Raad 23 november 2007

Under the third condition, if the employer has in the State in which the employment is exercised a permanent establishment, the exemption is given only on condition that the remuneration is not borne by a permanent establishment which he has in that State. The phrase 'borne by' must be interpreted in the light of the underlying purpose of subparagraph 2c) of the Article, which is to ensure that the exception provided for in paragraph 2 does not apply to remuneration that is deductible, having regard to the principles of Article 7, in computing the profits of a permanent establishment situated in the State in which the employment is exercised. In this regard, it must be noted that the fact that the employer has, or has not, actually deducted the remuneration in computing the profits attributable to the permanent establishment is not necessarily conclusive since the proper test is whether the remuneration would be allowed as a deduction for tax purposes; that test would be met, for instance, even if no amount were actually deducted as a result of the permanent establishment being exempt from tax in the source country or of the employer simply deciding not to claim a deduction to which he was entitled.'

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