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L.C. van Hulten, datum 06-07-2022

Datum: 06-07-2022
Auteur: L.C. van Hulten
JCDI: JCDI:ADS657735:1
Vakgebied(en): Europees belastingrecht / Richtlijnen EU
Vennootschapsbelasting / Fiscale eenheid
Internationaal belastingrecht / Belastingverdragen
Vennootschapsbelasting / Belastingplichtige

The international tax environment is changing rapidly. First the OECD BEPS project led to many changes, both on a domestic and international tax level.1 Following the BEPS project, the OECD/G20 Inclusive Framework reached an agreement in October 2021 with respect to a two-pillar solution aimed at addressing the tax challenges from digitalisation and globalisation of the economy.2 The reason for this project are the problems with the current international tax rules that are reflected in bilateral tax treaties. The first problem is that the current rules require physical presence in a country to be able to levy taxes. Secondly, most countries only tax domestic profits of their multinationals, under the assumption that the foreign profits will be taxed where they are earned.3 Pillar One will re-allocate the profit of the largest and most profitable multinationals to market jurisdictions. Pillar Two essentially determines how other countries can levy additional taxes if a country does not tax profits at all, or not sufficiently, in line with its national legislation. It will subject multinationals to a minimum 15% tax rate and will thus put a floor on excessive tax competition.4

The rapid developments show that the international tax system is high on the political agenda and that there is willingness of countries to come to a multilateral solution on at least some aspects of the international tax system. Therefore, this is the time to also critically assess the rules as included in the OECD MTC.

A study related to this research is Da Silva's research on the influence of tax treaties and EU law on corporate income tax regimes.5 Yet Da Silva’s study focused mainly on group taxation regimes as such (i.e., domestic group taxation regimes: the group contribution system, the group relief system and the consolidation regimes), whereas this research concentrates on groups of companies in general (i.e., irrespective of whether they benefit from a domestic group taxation regime).

Jiménez-Valladolid de l'Hotellerie-Fallois studied reorganization provisions in tax treaties.6 One of the objectives of that study was to arrive at a proposal for specific reorganization provisions that could become part of future tax treaties. In a way, this study is related to the present research, though its scope is different as it only focuses on restructuring provisions in tax treaties.

Another study that is related to this research addresses the taxation of corporate groups under consolidation. Ting made a comprehensive comparative study of eight different national consolidation regimes.7 As the focus was on domestic group taxation regimes, the overlap with this research is limited.

Additionally, some authors address the issue of groups of companies and tax treaty application. Staringer describes the application of tax treaty law to business income of tax groups.8 This only concerns one of the topics that is part of this research.

Moreover, an overview of the treaty recognition of groups of companies has been made by Sasseville for a former variant of the OECD MTC.9 This overview raises the question whether the OECD MTC should be modified to ensure a further recognition of groups of companies. A question which the author has left unanswered.

More generally related to the international tax system, Broekhuijsen addressed the research question: ‘how to design a multilateral agreement for international taxation that fundamentally transforms the way states cooperate in the field of international tax?’10 Bravo’s research also revolved around the multilateral instrument.11 In this research, the issues around implementation of the potential changes to the international tax treaty framework are only briefly touched upon.

Garfias von Fürstenberg analysed whether the principles which govern the treatment of passive investment income in tax treaties between developing and developed countries are effective and appropriate for the interests of developing countries.12 This research does not specifically discuss tax treaty rules that might be suitable for developing countries.

All in all, this is – to my knowledge – the first research to comprehensively discuss the current and desired treatment of companies in a group in the context of tax treaties.

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E.g., within the EU via ATAD implementation and via the MLI for existing tax treaties.

OECD, Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, Paris: OECD Publishing 2021. The project started as an attempt to answer the tax challenges arising from the digitalisation of the economy and led to envisaged changes to the international profit tax system (Pillar One) and an international agreement to guarantee a minimum level of profit taxation (Pillar Two).

OECD, Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, Paris: OECD Publishing 2021, p. 13.

The Pillar Two project is also called the Global Anti-Base Erosion Proposal (GloBE). The rules will apply to multinationals that meet a EUR 750 million threshold. A carve-out rule accommodates tax incentives provided to stimulate substantial economic activities. Additionally, inter alia, a subject to tax rule to protect the rights of developing countries to tax certain base-eroding payments is included in the solution (OECD, Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, Paris: OECD Publishing 2021, p. 4). See also OECD, Tax Challenges Arising from the Digitalisation of the Economy - Global Anti-Base Erosion Model Rules (Pillar Two): Inclusive Framework on BEPS, Paris: OECD Publishing 2021.

B.F.A. da Silva, The Impact of Tax Treaties and EU Law on Group Taxation Regimes, Alphen aan den Rijn: Kluwer Law International 2016.

D.J. Jiménez-Valladolid de l'Hotellerie-Fallois, Reorganization Clauses in Tax Treaties, Amsterdam: IBFD 2014.

A. Ting, The Taxation of Corporate Groups under Consolidation: An International Comparison, Cambridge: Cambridge University Press2013.

C. Staringer, ‘Chapter 8: Business income of tax groups in tax treaty law’, in G. Maisto (ed.), International and EC Tax Aspects of Groups of Companies, Amsterdam: IBFD 2008.

J. Sasseville, ‘Chapter 6: Treaty recognition of groups of companies’, in G. Maisto (ed.), International and EC Tax Aspects of Groups of Companies, Amsterdam: IBFD 2008.

10.

D.M. Broekhuijsen, A Multilateral Tax Treaty Designing an instrument to modernise international tax law, Alphen aan den Rijn: Kluwer Law International2017.

11.

N. Bravo, A Multilateral Instrument for Updating the Tax Treaty Network, Amsterdam: IBFD 2020.

12.

G. Garfias von Fürstenberg, Allocation of taxing rights in Tax Treaties between Developing and Developed countries: Re-thinking principles, Maastricht: Maastricht University 2021.