Einde inhoudsopgave
Treaty Application for Companies in a Group (FM nr. 178) 2022/6.3.1
6.3.1 Introduction
L.C. van Hulten, datum 06-07-2022
- Datum
06-07-2022
- Auteur
L.C. van Hulten
- JCDI
JCDI:ADS659370:1
- Vakgebied(en)
Omzetbelasting / Plaats van levering en dienst
Voetnoten
Voetnoten
The analysis in chapter 3 revealed some more general issues in the OECD MTC. In particular, the application of the various treaty articles can lead to double taxation or opportunities for tax avoidance if the two Contracting States interpret the treaty terms differently. According to the OECD Commentary, if qualification differences arise due to differences in national law, the interpretation of the source state should be followed. However, this approach is not followed by all countries. For this specific situation, and more generally, an important factor in a successful application and functioning of the OECD MTC is the role of the OECD Commentary. The Commentary can ensure that tax treaties are interpreted in a uniform manner by all countries. To this end it could be considered to add a specific provision to the tax treaty that confirms that both treaty partners agree that the Commentary governs the application of the tax treaty (see also B. Arnold, J. Sasseville & E. Zolt, ‘Summary of the Proceedings of an Invitational Seminar on Tax Treaties in the 21st Century’, Bulletin for International Taxation 2002, vol. 56, no. 6, par. 11). Such a provision is for example included in par. I of the Protocol to the 2021 tax convention between Chili and the Netherlands and reads as follows: ‘It is understood that the Commentaries on the Model Conventions of the OECD and UN – as they may be revised from time to time – constitute a means of interpretation in the sense of the Vienna Convention on the Law of Treaties of 23 May 1969 as far as the provisions of this Convention correspond to the OECD and UN Model Conventions and are subject to any contrary interpretations stipulated in this Protocol, any contrary interpretation agreed to by the competent authorities after the entry into force of this Convention and any future reservations or observations to the OECD and UN Model or their Commentaries made by either Contracting State.’ The aim to include such a provision is part of the tax treaty policy of the Netherlands (see Dutch Parliamentary Documents I 2019/20, 25087, N, par. 2.6). A provision drafted along these lines could be added to the OECD MTC to clarify the role of the Commentary. Alternatively, the role of the OECD Commentary could be clarified by amending art. 3, par. 2, OECD MTC. See in this regard the suggestion made by Van Weeghel (S. van Weeghel, ‘The OECD Model Tax Convention and Its Commentaries: Towards a Multilateral approach’, p. 306, in B.J. Arnold (ed.), Tax Treaties After the BEPS Project: A Tribute to Jacques Sasseville, Toronto: Canadian Tax Foundation 2018).
B.J. Arnold, J. Sasseville & E.M. Zolt, ‘Summary of the Proceedings of an Invitational Seminar on the Taxation of Business Profits under Tax Treaties’, Bulletin for International Taxation 2003, vol. 57, no. 5, par. 6.
H.J. Ault & J. Sasseville, ‘Taxation and Non-Discrimination: A Reconsideration’, World Tax Journal 2010, vol. 2, no. 2, par. 2.3.
Solving the fact that, e.g., the anti-fragmentation provision of art. 5 OECD MTC cannot take into account multilateral situations would require a multilateral approach.
The previous section describes an overarching solution with respect to the treatment of groups of companies for tax treaties purposes. However, it seems fair to say that this overarching solution does not seem realistic at all from a political perspective. Therefore, this section outlines some probably more realistic solutions to make the OECD MTC more suitable for companies in a group.1 The several updates of the OECD MTC throughout the years have made the model more complex. Various topics for which rules were originally provided on a national level are currently governed by tax treaties. Unfortunately, adapting the model to take better account of groups of companies could result in an even more fragmented system. However, it could also contribute to achieving the objectives of the OECD MTC.
It is difficult for bilateral tax treaties, to effectively take account of multinational corporate groups.2 Also, the objective to treat resident and non-resident companies the same will often conflict with the need to maintain the tax treaty allocation of taxing rights.3 Still, it seems that some improvements can be made.4 Therefore, first it should be established whether a group definition that applies throughout the convention can be introduced (par. 6.3.2). Furthermore, some changes that would improve the extent to which the OECD MTC reaches its objectives in respect of groups of companies are elaborated upon (par. 6.3.3 up to and including par. 6.3.8). Subsequently, some thoughts on the potential implementation manner are described (par. 6.3.9). Then, the solutions are evaluated and the identified issues that are not solved are listed (par. 6.3.10). The section ends with an interim conclusion (par. 6.3.11).