Legal entities are usually not fully autonomous, but are part of a larger economic unit. Oftentimes, there exists a certain connection with other legal entities. For instance, this is the case when a legal entity holds all or part of the shares in another legal entity. In principle, a legal entity is taxed separately from its shareholders. In OECD MTC based tax treaties, the starting point is also that each individual legal entity must be considered for the application of the treaty (separate entity approach). In treaty relations, deviation from the principle that entities in a group should be treated as separate entities is exceptional.
In Treaty Application for Companies in a Group, the author argues that the legal approach taken for taxation purposes does not align with economic reality and does not seem to fit in today's internationally oriented world. More specifically, it leads to double taxation and offers opportunities for tax avoidance. Even though a multitude of ad hoc rules have been implemented in trying to solve this tax issue, the single legal entity remains the starting point for these amendments and so-called solutions. This approach has created a complicated and fragmented system.
This PhD research discusses the current and desired treatment of companies in a group in the context of tax treaties. The author examines whether, from the perspective of the aim and purpose of the OECD MTC, the separate entity approach for the application of treaty rules in the OECD MTC should be replaced by a group approach. Subsequently, the question is explored what this adjustment would mean for the treaty rules.
In the literature, the desired treatment for tax purposes of companies in a group is usually assessed from a domestic rather than a tax treaty perspective. This pioneering work is 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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