3.4.1 Introduction

For instance, art. 9 OECD MTC and art. 10, par. 2, sub a, OECD MTC.

Some treaties more indirectly take into account the group situation in a treaty provision. For example, the tax treaty between Austria and Switzerland reflects the influence of an entity’s group situation on the place of effective management test (Austria - Switzerland Income and Capital Tax Treaty 1974, as amended through 2012, art. 4, par. 5). The provision reads as follows:‘Where, according to the provisions of paragraph 1, a company is deemed to be a resident of both Contracting states, it is deemed to be a resident of the Contracting state where the centre of its effective management is located. The mere fact that a person is participating in a company, or that he makes the group decisions for a company which belongs to a group of companies, does not constitute, for that company, a centre of effective management at the place where these decisions are made or this person is resident.’ The provision clarifies that a shareholder is not considered to be part of the management of that entity solely because of holding the shares. Furthermore, decisions on the policy of the group as such, made by the shareholder, are not considered management activities related to group members. In essence, this additional explanation is in line with the tiebreaker as included in art. 4, par. 3, OECD MTC. This tiebreaker is based, inter alia, on the place of effective management of an entity (under the ‘old’ tiebreaker, only the place of effective management was relevant). The place of effective management of a company is in the state in which the key decisions of a company are made. In this regard it should be determined where the most senior group of persons (board of directors) make their key management and business decisions(E. Reimer et al., Klaus Vogel on Double Taxation Conventions, Alphen aan den Rijn: Kluwer Law International 2022, p. 317). Occasional involvement of a shareholder in the decisions making process is immaterial (see also F. Brugger, ‘Chapter 10: Austria’, par. 10.3.6, in G. Maisto (ed.), International and EC Tax Aspects of Groups of Companies, Amsterdam: IBFD 2008). Thus, the fact that a company is part of a group of companies, does not imply that the effective management of the company is performed by the parent of the group(I.J.J. Burgers, R.P.C. Adema & M.F. de Wilde, ‘Chapter 4: Residence, Multinational Enterprises and BEPS: Is Determining the Residence of Companies Belonging to Multinational Groups Mission Impossible?’, par. 4.3.3.1, in E. Traverso (ed.), Corporate Tax Residence and Mobility, Amsterdam: IBFD 2018.).Another example of a treaty provision in which the group situation is more indirectly addressed is a provision in which the application of the ownership non-discrimination provision to group consolidation regimes is explicitly excluded (see par. 3.3.5.2). Additionally, many of Canada’s income tax treaties include specific provisions to make sure Canada’s CFC regime and thin capitalization rules can be applied without tax treaty interference (A. Nikolakakis, ‘Chapter 2: The common law perspective on the international and EC law aspects of groups of companies’, par. 2.6, in G. Maisto (ed.), International and EC Tax Aspects of Groups of Companies, Amsterdam: IBFD 2008).