2 Scope税收协定适用范围
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Structure of a treaty
Art.1 PБайду номын сангаасrsons covered
Art.2 Taxes covered
Personal and substantive scope
Allocation Rules
Art.4 Resident
Method Article
Exemption method Credit method
The convention should apply to:
Persons (Art.3 (1) OECD Model)
Individuals Companies (any body corporate or any entity that is treated as a body corporate for tax purposes) Any other body of persons
10
2015-3-3
2.1 Persons covered
Dual residence
This situation may be the result of different criteria for the classification as residents Tax treaty requires only one resident state in order for the allocation rules and method article to apply properly Only one resident should be determine for tax treaty purposes
2015-3-3
3
2.1 Persons covered
Art.1 icw Art.4 OECD Model
2015-3-3
4
2.1 Persons covered
Article 1 This Convention shall apply to persons who are residents of one or both of the Contracting States.
2015-3-3
11
2.1 Persons covered
Dual residence – Individuals
Tie-breaker rule (Art.4 (2) OECD Model) Permanent home Centre of vital interest Habitual abode Nationality Mutual agreement procedure
2015-3-3
12
2.1 Persons covered
dual residence – Individuals
Case 3: An individual with a permanent home in Germany has his habitual abode in Austria. The tax treaty concluded between Germany and Austria follows the OECD Model. Under the applicable tax treaty, the individual is deemed to be tax resident in Germany. Consequently, Germany has the right to tax the individual’s worldwide income while Austria may only tax income that arises in its territory.
Law of Double Taxation Conventions
中央财经大学 张京萍
2015-3-3
1
Chap.2 Scope of the convention
2.1 Persons covered 2.2 Taxes covered
2015-3-3
2
Chap.2 Scope of the convention
Person subject to taxation only on income from sources
Special provisions (Art. 24 - Art. 27 OECD Model) are not restricted by Art. 1
7
2015-3-3
2.1 Persons covered
9
2015-3-3
Treaty entitlement of partnerships
Case 2: A partnership with a head office in State P receives dividends from a company resident in State S. the partners of the partnership are resident in State R. State S and State R treat the partnership as a taxable entity while State P treats it as transparent. According to the opinion set out in the OECD Partnership Report, the P-S DTC is not applicable because the partnership is not a resident of State P since State P treats it as transparent. The partners are resident in State R but since State R consider the income to be earned by the partnership and not the partners, the R-S DTC cannot apply. Therefore, the tax in State S is not restricted since neither DTC applies. If, however, the characterization in the source state were followed, the P-S DTC could apply. Admittedly, the partnership is not resident in State P; however, the necessary connection for purposes of residency (head office) exists in P. (P75)
2015-3-3
8
2.1 Persons covered
Treaty entitlement of corporate entities that are subject to limited tax liability
Public law corporations ( e.g. Public Institutions)
Yes or No?
Corporate entities exempted from full tax liability. (i.e. exempt organizations)
Yes or No?
Treaty entitlement of Partnerships and/or partners “persons”? Yes Full tax liability? It depends Special provision for partnerships in some DTCs
2015-3-3
13
2.1 Persons covered
dual residence – Individuals
Case 4: An individual, who is resident both of Finland and of Switzerland, receives dividends from sources in Switzerland. Pursuant to Art.10(2) of the Finland-Switzerland DTC，the tax at source is restricted to 10%. However, the application of Art.10 of that DTC requires that the company paying the dividends and the person receiving the dividends are residents of different contracting states. In other words, Art.10 Finland-Switzerland DTC applies only if the application of the tiebreaker rules of Art.4(2) of the Finland-Switzerland DTC leads to the recipient of the dividends being a resident of Finland. (p77)
The DTC signed between two states is not applicable in cases of limited tax liability in both states.
Case 1: An individual is resident in Switzerland. She receives dividends from a corporation incorporated in France with its place of effective management in Germany. Both Germany and France tax the dividends paid to the individual. However, the FranceGermany DTC does not apply since the individual is subject only to limited tax liability in both states. Double taxation can only be avoided by the application of the France-Switzerland DTC and the Germany-Switzerland DTC. (p66)
Two conditions：
A “person” within the meaning of the treaty That this person is a “resident” at least of one of the contracting states
2015-3-3
5
2.1 Persons covered
6
2015-3-3
2.1 Persons covered
Full tax liability as a prerequisite for the application of the DTCs Full tax liability at least in one contracting state A person could not be considered as a “resident of a contracting state” (tax treaty purposes)
Residents of a contracting state (Art.4(1)OECD Model) (Subject to tax under domestic law)
Domicile Residence Place of management Any other criteria of similar nature
Art.1 PБайду номын сангаасrsons covered
Art.2 Taxes covered
Personal and substantive scope
Allocation Rules
Art.4 Resident
Method Article
Exemption method Credit method
The convention should apply to:
Persons (Art.3 (1) OECD Model)
Individuals Companies (any body corporate or any entity that is treated as a body corporate for tax purposes) Any other body of persons
10
2015-3-3
2.1 Persons covered
Dual residence
This situation may be the result of different criteria for the classification as residents Tax treaty requires only one resident state in order for the allocation rules and method article to apply properly Only one resident should be determine for tax treaty purposes
2015-3-3
3
2.1 Persons covered
Art.1 icw Art.4 OECD Model
2015-3-3
4
2.1 Persons covered
Article 1 This Convention shall apply to persons who are residents of one or both of the Contracting States.
2015-3-3
11
2.1 Persons covered
Dual residence – Individuals
Tie-breaker rule (Art.4 (2) OECD Model) Permanent home Centre of vital interest Habitual abode Nationality Mutual agreement procedure
2015-3-3
12
2.1 Persons covered
dual residence – Individuals
Case 3: An individual with a permanent home in Germany has his habitual abode in Austria. The tax treaty concluded between Germany and Austria follows the OECD Model. Under the applicable tax treaty, the individual is deemed to be tax resident in Germany. Consequently, Germany has the right to tax the individual’s worldwide income while Austria may only tax income that arises in its territory.
Law of Double Taxation Conventions
中央财经大学 张京萍
2015-3-3
1
Chap.2 Scope of the convention
2.1 Persons covered 2.2 Taxes covered
2015-3-3
2
Chap.2 Scope of the convention
Person subject to taxation only on income from sources
Special provisions (Art. 24 - Art. 27 OECD Model) are not restricted by Art. 1
7
2015-3-3
2.1 Persons covered
9
2015-3-3
Treaty entitlement of partnerships
Case 2: A partnership with a head office in State P receives dividends from a company resident in State S. the partners of the partnership are resident in State R. State S and State R treat the partnership as a taxable entity while State P treats it as transparent. According to the opinion set out in the OECD Partnership Report, the P-S DTC is not applicable because the partnership is not a resident of State P since State P treats it as transparent. The partners are resident in State R but since State R consider the income to be earned by the partnership and not the partners, the R-S DTC cannot apply. Therefore, the tax in State S is not restricted since neither DTC applies. If, however, the characterization in the source state were followed, the P-S DTC could apply. Admittedly, the partnership is not resident in State P; however, the necessary connection for purposes of residency (head office) exists in P. (P75)
2015-3-3
8
2.1 Persons covered
Treaty entitlement of corporate entities that are subject to limited tax liability
Public law corporations ( e.g. Public Institutions)
Yes or No?
Corporate entities exempted from full tax liability. (i.e. exempt organizations)
Yes or No?
Treaty entitlement of Partnerships and/or partners “persons”? Yes Full tax liability? It depends Special provision for partnerships in some DTCs
2015-3-3
13
2.1 Persons covered
dual residence – Individuals
Case 4: An individual, who is resident both of Finland and of Switzerland, receives dividends from sources in Switzerland. Pursuant to Art.10(2) of the Finland-Switzerland DTC，the tax at source is restricted to 10%. However, the application of Art.10 of that DTC requires that the company paying the dividends and the person receiving the dividends are residents of different contracting states. In other words, Art.10 Finland-Switzerland DTC applies only if the application of the tiebreaker rules of Art.4(2) of the Finland-Switzerland DTC leads to the recipient of the dividends being a resident of Finland. (p77)
The DTC signed between two states is not applicable in cases of limited tax liability in both states.
Case 1: An individual is resident in Switzerland. She receives dividends from a corporation incorporated in France with its place of effective management in Germany. Both Germany and France tax the dividends paid to the individual. However, the FranceGermany DTC does not apply since the individual is subject only to limited tax liability in both states. Double taxation can only be avoided by the application of the France-Switzerland DTC and the Germany-Switzerland DTC. (p66)
Two conditions：
A “person” within the meaning of the treaty That this person is a “resident” at least of one of the contracting states
2015-3-3
5
2.1 Persons covered
6
2015-3-3
2.1 Persons covered
Full tax liability as a prerequisite for the application of the DTCs Full tax liability at least in one contracting state A person could not be considered as a “resident of a contracting state” (tax treaty purposes)
Residents of a contracting state (Art.4(1)OECD Model) (Subject to tax under domestic law)
Domicile Residence Place of management Any other criteria of similar nature