Stephen C. Fox, CPA
U.S. International Tax
Stephen C. Fox, CPA, CMA
PO Box 880695
Port Saint Lucie,  FL  34988
+1(973) 610-5669



Commissionaire arrangements are a creature of European civil law.  Two parties, the principal and the commissionaire, agree that the commissionaire will act as undisclosed agent in sale of the principal's goods to customers. The principal is bound by actions of the commissionaire, but is only liable to the commissionaire for breach. The customer may or may not be informed of the arrangement, but in either case has recourse only to the commissionaire for breach.


European civil law features limiting the liability of the principal also have the effect of limiting taxability of the principal.  A commissionaire's activities, place of business and permanent establishment are not attributed to the principal under tax laws of certain countries.  This can permit a principal from having income tax exposure in a civil law country if it has no other permanent establishment in the country. 


Stripped Distributors


Under U.S., UK, Canadian, and other common law, a commissionaire arrangement creates agency, and the customer would have recourse against the principal.  Thus, in the U.S., commissionaire arrangements are the same as agency arrangements.  For U.S. tax purposes, the commissionaire's activities, and potentially its place of business and permanent establishment, are attributed to the principal.  A foreign principal with a commissionaire operating in the U.S. has exposure to U.S. tax if the commissionaire does.


For U.S. and other common law countries, a stripped distributor or limited risk distributor can reduce taxes for the distributor and limit tax exposure for the principal. Often such stripped distributors operate in the same manner as full risk distributors, but have agreements shifting risks (such as inventory and receivables).


Commissionaire structures have survived attack by French tax authorities.  In Zimmer, Ltd., the Supreme Administrative Court (the top court for tax matters in France) held on March 31, 2010, that a commissionaire arrangement did not create a permanent establishment for a UK company.  The ruling upheld the priority of civil law relationships over facts and circumstances.


Call Steve Fox to help you significantly reduce tax exposures in European civil law countries with commissionaire agreements and in the U.S. with stripped distributors. 

It's your business:  get personal.  Call Steve Fox at  1(973) 610-5669  or  email steve @ sfoxcpa .com
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