5.2.4.4 Group taxation regimes that apply on a domestic level

If a group regime is solely applied on a domestic level, with regard to business income there seems to be no conflict with tax treaties. Only business income that has its source in the respective country is included in the levy. This is also true if the enterprise doctrine is extended to permanent establishments of non-residents in the country.1

If assets are transferred intra-group in a domestic context, taxes can often be deferred. If there is an event that influences the group relationship, deferred gains/losses are likely recaptured.2 This also merely concerns the source taxation, and thus does not lead to problems under tax treaties.3

Receiving passive income (such as interest or royalties) will normally increase the taxable basis of an entity. However, for this taxation – if the receiving entity has treaty access and is considered to be the recipient of the income – it does not seem relevant whether or not the receiving entity is taxed on a separate entity or a group basis.4