Dual Resident Entities | Article 4 | Complete flowchart

Article 4 of MLI provides a tie-breaker rule for the dual resident entities for determining their tax residence. A company is easily considered tax resident in two different states simultaneously when it registers under one state’s laws but has the place of effective management in another. It is generally understood that a place of effective … Continue reading Dual Resident Entities | Article 4 | Complete flowchart →

Covered Tax Agreement | Article 2 Decision Tree

For easy understanding of the applicability of Article 2(1)(a)(ii) of MLI, we present the decision tree diagram (flow chart). It is a quick summary of Article 2 of Multilateral Instrument. As per Article 2(1)(a)(ii) of MLI, the MLI will modify only those double tax agreements that : Each Party has specifically identified and listed in … Continue reading Covered Tax Agreement | Article 2 Decision Tree →

Everything about Triangular Cases

We have repeatedly discussed how corporate and multinational entities have creatively used the tax treaties to reduce their overall tax liabilities. One such measure is a typical “Triangular case” where three countries are involved, the State of residence of the entity, the State of the Source, and the State where the Permanent establishment is resident … Continue reading Everything about Triangular Cases →

Capital Gains from Alienation of Shares or Interests – Article 9 of MLI

OECD Model Tax Convention and the UN Model provide for taxation of capital gains under Article 13. Though it is an essential source of income, the DTAA does not define the term “capital gains.”. Article 9 of the Multilateral Instruments seeks to amend Paragraph 4 of Article 13 of the OECD model tax convention, which … Continue reading Capital Gains from Alienation of Shares or Interests – Article 9 of MLI →

Dividend Transfer Transactions – Article 8 of MLI

Article 10 of the OECD Model Tax Convention and United Nations Model Convention deals with the taxation of dividends. OECD and G20 in BEPS Action 6 report recommended the changes to be incorporated in dividend taxation provisions to remove the effects of tax abuse created by comprehensive tax planning. Article 8 of Multilateral Instruments is … Continue reading Dividend Transfer Transactions – Article 8 of MLI →

Everything about Article 7 of MLI | Treaty Abuse

Multilateral Instrument (MLI) is an instrument that implements tax treaty-related measures of BEPS. Article 7 of MLI is made by the recommendations of OECD and G20 in the BEPS Action 6 Report. Structure of Article 7 of MLI Paragraph 1 of Article 7 Paragraph 1 of Article 7 covers the principal purpose test, where the … Continue reading Everything about Article 7 of MLI | Treaty Abuse →

Flowchart on Interaction between Anti Abuse Rules | Multilateral Instrument

In the below flowchart we have tried to simplify the interaction between the Treaty Specific Anti Abuse Rules, Principal Purpose Test, Limitation of Benefits Rules, and General Anti Abuse Rules. It is for quick review only, and in-depth analysis is suggested while applying for real-life cases.

Everything about Simplified Limitation of Benefits | SLOB Test

Simplified Limitation of Benefit (SLOB), also known as Specific Anti-Abuse Rules, is one of the three alternative rules provided in the BEPS Action 6 Report on Preventing the tax treaty benefits in inappropriate circumstances. Simplified Limitation of Benefits is an objective test to define the normative criteria and attributes that determine whether the income recipient … Continue reading Everything about Simplified Limitation of Benefits | SLOB Test →

Principal Purpose Test | Paragraph 1 of Article 7 of MLI

BEPS Action 6 Report on Preventing the tax treaty benefits in inappropriate circumstances includes three alternative rules to address situations of treaty abuse. Firstly, a general anti-abuse rule (GAAR) is based on the principal purpose of transactions or arrangements. The second a simplified version of specific anti-abuse rules (SAAR), and the third a detailed version … Continue reading Principal Purpose Test | Paragraph 1 of Article 7 of MLI →

Article 6 of MLI – Purpose of Covered Tax Agreement

Article 6 of MLI provides the preamble and purpose of the Covered Tax Agreement. BEPS Action 6 acknowledges that preamble is an essential source for interpreting treaties as the same provides clear intent or a rationale that persuaded two countries to enter into a treaty. According to the basic rule of interpretation of treaties in … Continue reading Article 6 of MLI – Purpose of Covered Tax Agreement →