Since the OECD started conceiving and implementing the BEPS project, the major argumentation in favour of the new policies is mainly based on the refrain that everybody should pay their “fair share” of taxes. It is hard to find any publicly available explanation about what exactly lies behind the idea of a “fair share” of…

The Tax Court of Canada decision in Alta Energy Luxembourg S.A.R.L. v. The Queen, 2018 TCC 152 (CanLII) on August 22, 2018 may provide useful pointers to the meaning and application of the PPT found in Article 7(1) of the MLI and Article 29(9). A Luxembourg resident company claimed exemption from Canadian income tax under…

The idea for this article came to me after I read a piece published by the International Tax Review with the title “Mexico confirms that US may qualify as a preferential tax regime in light of the 2017 Tax Cuts and Jobs Act”.[1] Instead of curating a proper blacklist, or a published list of tax havens…

The update on tax certainty IMF/OECD Report for the G20 Finance Ministers and Central Bank Governors   published on 22 July 2018 may not have been everyone’s summer holiday reading. This report follows on from the 2017 IMF/OECD Report for the G20 Finance Ministers in March 2017. It should certainly give pause for thought. The “tax…

On May 11th a very interesting conference with the topic “How Source and Residence have Developed: Rethinking the Principles of International Income Taxation” has taken place, in Bergamo, organised by the Department of Law of the University of Bergamo and by the University of Heidelberg. Having not stayed until the discussion, I could not comment…

What the UK government wants by way of Brexit outcome seems to change daily, with the government and political parties in Parliament divided among various factions. The only legal certainty about Brexit is that unless the UK and the remaining member states agree otherwise, EU law will cease to apply in the UK after 29…

Introduction One of the most controversial topics of transfer pricing, in today’s multinational world, is the pricing of intercompany financial transactions. The 2017 OECD transfer pricing guidelines (TPG) lack clear rules specifically tailored to financial transactions, which can lead to a higher risk of divergent treatment of these transaction between tax administrations and taxpayers and…

The Existing Framework: Nexus and Profit Attribution Rules Under the current Double Taxation Avoidance Agreement (DTAA) framework, business profits are in principle taxable in the State of residence of the enterprise. However, the source (market) jurisdictions may tax the profits if a permanent establishment (PE) is triggered therein. A PE arises when the non-resident operates…

I am delighted to see that my post on value creation has stimulated discussion on the fundamental thinking about international taxation. See the posts of my friends and colleagues Werner Haslehner and Sergio André Rocha. At the IFA seminar in Rotterdam, we puzzled over the meaning of “value creation”. Werner also referred to another mystifying…

The well-known expression “butterfly effect” comes from chaos theory, and it refers to the idea that a butterfly could flap its wings in Brazil and, through ripple effect, set off a tornado in Texas. Bringing this expression into the tax world, a decision by a domestic court on a seemingly domestic tax matter could trigger…

For many years, I have been advocating a drastic change in the distribution approach for taxing rights in international taxation. The focus of my criticism has been Article 7 of the OECD and UN Model Conventions.  My core argument continues to be that the so-called “permanent establishment principle” disregards the role of the infrastructure that…

Following up on Jonathan Schwarz’s latest blog contributing to the debate on taxation and value creation, I wanted to attempt adding some further critical points. The OECD’s stated goal of the second pillar (“Substance”) of its BEPS action plan is to align taxation with value creation. It has already been observed that this is a…

The importance of the permanent establishment (PE) principle in tax treaties cannot be undermined. Whether or not a source country has the right to tax business profits of a foreign company would depend wholly on the existence or non-existence of a PE of that company in the source country. Work undertaken by the OECD in…