6.4 Conclusion

A group approach in the OECD MTC would be more in line with the objectives of the OECD MTC and would contribute to the neutrality of the tax system for groups of companies. This exactly fits within the current international tax environment in which companies are more and more interdependent economically. Therefore, the separate entity approach should be abolished. This would tackle the international tax problems arising under both national law and the OECD MTC at its roots.

The group as a whole should be taxed under national law and should subsequently be seen as a treaty resident. If groups of companies as such would be a person for the application of the OECD MTC, the definition of the concept of unitary business should be included. If the separate existence of related corporations is ignored, there is still the need for the OECD MTC to establish rules on tax jurisdiction, establish the details on a method to allocate income and define rules to eliminate double taxation. The fundamental solution should be implemented via a multilateral tax treaty.

In the second part of this chapter, somewhat more realistic changes to the OECD MTC to make the model more suitable for groups of companies have been elaborated upon. With these changes, the OECD MTC could be made better suitable to deal with groups of companies, while contributing to its objectives. This includes changes in the residence definition, changes to avoid double taxation with respect to dividend payments, and a reorganization clause. Introducing these ad hoc solutions in existing tax treaties could be done via a second multilateral instrument.