2.5 Conclusion

This chapter revolves around the concept of a group. The concept can be found in all sorts of schemes without it having an unambiguous definition. In this chapter the central question was: which elements are, or may be, important when drafting a treaty definition of the group concept, taking into account the objectives of the OECD MTC. In short, the OECD MTC aims to prevent juridical double taxation, without creating opportunities for tax avoidance. With these objectives the OECD strives to stimulate cross-border investments and in essence to create a more neutral system.

In an attempt to counteract the proliferation of group definitions, an unambiguous definition that applies to all relevant treaty provisions should be introduced. The starting point should be the group as such: the group definition should combine de facto control and integration. The parent company should be able to exercise effective control. Additionally, there should be a business link between the entities. The shareholding should be held as a capital asset, aimed at employing it for the benefit of the company in the long run. All in all, there should be a single entity from an economic perspective. This would be in line with economic reality and contribute to legal form neutrality. Such an open standard requires an analysis of the actual situation, thus providing a group definition that is effective in terms of preventing abuse. This also means the boundaries of the firm can be ‘blurry’. Therefore, the open standard is both the strength and the weakness of the definition.

The group definition for tax treaty purposes should encompass legal entities and unincorporated legal entities. The worldwide group should be taken into account. Additionally, permanent establishments should be included in the scope of a group definition if it is implemented in the current framework. Moreover, in my opinion a continuous assessment should be performed. As soon as an entity complies with the group definition, it forms part of the group.