3.1 Introduction

OECD MTC based tax treaties start from the premise that each individual legal entity must be considered for treaty application, so a separate entity approach is applied.1 As a result, tax treaties do not – in principle – take into account the fact that the national legislation of countries sometimes considers related entities to be a single taxpayer. OECD MTC based tax treaties abandon the separate entity approach for certain elements. This is explicitly reflected in a number of treaty provisions, or the Commentary on those provisions.

This chapter focuses on the current treaty application for companies in a group. In this context, par. 3.2 first addresses – the influence of – the OECD MTC and its Commentary in general terms. Par. 3.3 focuses on the status quo in respect of the treaty application for companies in a group. In describing the rules of the OECD MTC, particular attention is paid to provisions in the OECD MTC or the related Commentary that highlight that the group situation of a legal entity is of relevance. For each provision of the OECD MTC which does or does not take account of a company's group situation, it is assessed whether the rule in question contributes to the objectives of OECD MTC based tax treaties: i.e., the elimination of double taxation, without creating opportunities for non-taxation or reduced taxation through tax avoidance.2 Par. 3.4 of this chapter pays attention to specific group provisions in bilateral tax treaties. Par. 3.5 includes some observations on the treaty application of group companies. Par. 3.6 concludes this chapter.