International Tax
The accelerating growth in global trade has occasioned the creation of new types of cooperative enterprises. For example, companies routinely form joint ventures or other partnership arrangements to engage in isolated projects or systematically to conduct business. Various forms of limited liability companies are also business and investment vehicles in the global arena. The application of treaties to these companies and vehicles gives rise to problems because tax treaties do not deal with attribution of income -- they only allocate items of income between the two treaty countries. To the extent a treaty allocates income to the residence country of the company or individual earning or receiving the income, the determination to whom this income is taxed (that is, which company or individual is considered to earn or receive the income), is made under the domestic law rules of each of the treaty states. If these rules differ in their application in a given case, conflicting attri![3] These treaty application problems have always existed but have been exacerbated in recent years by the growth of elective entity classification in some countries. For example, under U.S. law an entity, whether foreign or domestic,
Also, without such elective classification, inconsistencies result from different domestic entity classification rules. This discussion will not consider the approach taken in the OECD Report on the Application of the OECD Model Convention on Partnerships, issued August 16, 1999. tax purposes and as nontransparent for foreign tax purposes, or vice versa. In the first place, if the entity and the persons participating in the entity ("participants") are residents of different countries, it is possible that each of the two countries taxes the income to its resident(s), typically without any relief for the tax imposed by the other country (except perhaps to the extent it was sourced in the other country). Next, with respect to each case, the article focuses on the impact of the special U. model provides a solution, at least to the first of the issues mentioned above. Second, if the source country taxes the income to the participants, but the residence country of the entity and of the participants taxes the income to the entity (or vice versa), the individual income tax rate applied may be substantially higher than the corporate tax rate to which the entity is subject with respect to the income in its country of residence (again, or vice versa). (For prior coverage, see Tax Notes Int'l, Aug.
Common topics in this essay:
,
IRC Section,
Int'l Aug,
Convention Partnerships,
residence country,
company individual,
tax purposes,
article 41d,
model treaty,
taxes income,
recipient income,
irc section,
section 894c,
vice versa,
irc section 894c,
41d 1996 model,
income residence country,
article 41d 1996,
residence country company,
|
Acceptance Essays
