6.3.10.2 Concurrence with EU law

The influence of primary EU law on tax treaties concluded by Member States is limited. EU law is in principle indifferent in respect of the criteria to divide taxing powers between the states involved.1 Purely allocating taxing rights cannot result in an advantage that is seen as an infringement on EU law.2 This means that the aforementioned suggested changes to the OECD MTC with respect to allocating taxing rights would not lead to a conflict with EU law.3 Also, as both the exemption method and the credit method are seen as compliant with EU law, there should not easily be an issue.4

The suggested amendments would be in line with secondary EU law. In fact, tax treaties would be more aligned with the tax treatment that is already required under secondary EU law. If the withholding taxes on intra-group profit distributions would be abolished, this would reflect the approach taken in the PSD. Also, eliminating economic double taxation as a result of profit distributions would be in line with the goals pursued by the PSD. If the withholding tax rate on interest and royalty payments would be aligned for tax treaties, it could be higher than under the IRD. This would not raise any concerns, as the Directive is already implemented in domestic law and thus restricts the application of domestic law prior to treaty application. Furthermore, a reorganization clause at the level of tax treaties would contribute to achieving the MD goals. Moreover, alignment with respect to exit taxation at a tax treaty level would make the ATAD1 exit tax provision partially redundant.