6.2.5.3 Concurrence with current national law

As described, the proposed fundamental solution would have to be reflected in national law. This would mean countries would have to adhere to the new approach and substantially change their laws accordingly (see par. 6.2.2).

A full group approach from a national perspective would mean that existing group taxation regimes would be redundant. The full group approach would allow cross-border loss compensation as well as deferral of taxation with respect to the intra-group transfers of assets. The unitary business approach shows some resemblance with a cross-border group taxation regime. This is the case if the foreign subsidiary company is currently seen as a permanent establishment under a consolidation regime that applies on a cross-border basis. In both cases the intra-group transactions are not visible for tax purposes with a view to achieve a more legal form neutral tax system.

If changes would be solely made at a tax treaty level (i.e., the national law would remain unchanged), achieving the OECD MTC objectives would seem impossible. This could lead to differences in interpretation and application and therefore to double taxation and tax avoidance opportunities. It should be mentioned that the effect would also depend on the extent to which treaty obligations are adhered to in domestic law. Under the monistic view the treaty has direct legal effect, while the dualist view requires implementation in domestic legislation.1