The Resource Hybrid entities and conflicts of allocation of income within tax treaties : is new article 1(2) of the OECD Model (article 3(1) of the MLI) the best solution available?

Hybrid entities and conflicts of allocation of income within tax treaties : is new article 1(2) of the OECD Model (article 3(1) of the MLI) the best solution available?

Label
Hybrid entities and conflicts of allocation of income within tax treaties : is new article 1(2) of the OECD Model (article 3(1) of the MLI) the best solution available?
Title
Hybrid entities and conflicts of allocation of income within tax treaties : is new article 1(2) of the OECD Model (article 3(1) of the MLI) the best solution available?
Creator
Subject
Language
eng
Summary
The benefits of a tax treaty are generally granted to persons who are residents of one of the Contracting States. The determination of such tax residence status is, however, not always an easy task and is particularly problematic in relation to entities whose tax characterisation differs from one Contracting State to another thereby giving rise to conflicts of allocation of income. As a remedy for this, the OECD has introduced a new Article 1(2) in to the OECD Model Tax Convention 2017 (the OECD Model), the text of which is also replicated in Article 3(1) of the Multilateral Instrument (MLI). This provision, which reproduces the principles already settled within the 1999 OECD Partnership Report and which uses a wording which mirrors Article 1(6) of the US Model, is presented as the most effective way of dealing with the use of hybrid entities within the context of tax treaties. This is, however, only partially true. As is argued in this article, Article 1(2) of the OECD Model - and by extension Article 3(1) of the MLI - is not designed to interplay properly with other attribution rules within the relevant tax treaties, especially with regard to the beneficial ownership requirement of Articles 10, 11 and 12 of the OECD Model. Accordingly, Article 1(2) of the OECD Model maintains an unjustified preference for the interests of the residence state over those of the source state thereby generating concerns especially for developing (source) countries. As stressed in this article, a better solution might perhaps be found outside the treaty context, specifically through the use of a domestic rule that co-ordinates the characterisation of entities for tax purposes. This solution would not only eliminate any potential hybrid entity mismatch before the application of a treaty, but would also indirectly provide more consistent tax treaty outcomes without the need to replace or modify the current wording of Article 1(2) of the OECD Model
Citation source
In: British tax review. - London. - (2018), no. 3 ; p. 335-376
http://library.link/vocab/creatorName
Parada, L
Geographic coverage
International
Language note
English
http://library.link/vocab/subjectName
  • hybrid entity
  • tax treaty
  • OECD Model
  • MLI
  • allocation of income
  • beneficial ownership
  • BEPS
  • residence
  • developing countries
  • entity classification
Label
Hybrid entities and conflicts of allocation of income within tax treaties : is new article 1(2) of the OECD Model (article 3(1) of the MLI) the best solution available?
Instantiates
Publication
Label
Hybrid entities and conflicts of allocation of income within tax treaties : is new article 1(2) of the OECD Model (article 3(1) of the MLI) the best solution available?
Publication

Library Locations

    • IBFD Library AmsterdamBorrow it
      Rietlandpark 301, Amsterdam, 1019 DW, NL
      52.37366609999999 4.9336932
Processing Feedback ...