1.6 Methodology

This research aims to determine how groups of companies should be treated for tax treaty purposes assessed from the perspective of the aim and purpose of the OECD MTC.1 Therefore, the approach taken is normative: it analyses how treaty rules ought to be from the perspective of the assessment framework established and explained in par. 1.3.2 Additionally, the research includes descriptive as well as comparative elements.

The OECD MTC as it is currently in place is described.3 Subsequently, it is evaluated to what extent these rules contribute to reaching the objectives of the model. Additionally, suggestions for improvements adhering to the current framework are made,4 all using doctrinal legal research (or: legal-dogmatic research).5

To determine which elements are of importance for a model tax treaty that is more focused on groups of companies, existing systems are described and compared to the OECD MTC. Advantages and disadvantages of the already existing methods may provide valuable insights. This can be seen as comparative research.

By taking into account various existing group concepts, a comparative approach is used to arrive at a group concept for tax treaty purposes. First, the group concept for accounting purposes is chosen, as a more economic approach may better reflect the reason for the existence of multinational firms. Also, the group concept in the OECD MTC requires a discussion, as the research revolves around this model. The group concept from an EU perspective is particularly relevant, since the objectives of the EU are largely comparable to the objectives of the OECD MTC. After all, both aim to reduce tax obstacles to cross-border services, trade and investment, without providing opportunities for tax avoidance.6 Also, the group concepts used in national group taxation regimes are discussed, as those group concepts – like the OECD MTC – aim to contribute to the neutrality of the tax system.

Next to group concepts as such, the tax implications of being part of a group are an important element of this research. In this regard, the outcomes in CJEU case law as well as the choices made in various EU directives are described and analysed as part of the comparative law research.7 Also, a comparison is made to the approach taken in the OECD MTC. The comparison with an EU perspective is made on account of the aforementioned concurrence between the objectives of the EU and the OECD MTC. In this regard, the following question is answered: to what extent is the fact that an entity is not a standalone entity taken into account (i.e., some form of a group approach) in parts of EU law and would such an approach be recommendable from the perspective of the objectives of the OECD MTC?

Furthermore, the tax consequences of the application of existing domestic group taxation systems are described.8 Their concurrence with the OECD MTC is likewise analysed. As such, a comparative approach is applied once again. As indicated, domestic group taxation regimes are included in the analysis as they aim to contribute to the neutrality of the tax system. The central question in this respect is: to what extent is a group approach currently applied in domestic tax law and would such an approach be recommendable from the perspective of the objectives of the OECD MTC? This can provide valuable insights for a group approach as such, and it can clarify to what extent changes for national tax purposes would be required.9

The main goal of this research is to determine whether – instead of a separate entity approach – a group approach should be underlying the OECD MTC to be able to reach its objectives. In essence, the research revolves around what an international group approach for tax treaty purposes should look like to avoid double taxation in order to encourage cross-border activities, without providing opportunities for tax avoidance.10 The question thus is: how should the OECD MTC read from a normative point of view? In this regard, the assessment framework established and explained in par. 1.3 is applied.