Most-Favoured-Nation Treatment in an EC Tax Law Perspective - A Special Focus on the Principle's Effect on the Limitation on Benefits Clauses in Double Taxation Conventions
(2005)Department of Law
- Abstract
- The Most-Favoured-Nation treatment has been a common feature in international economic relations for a long period of time. The principle provides for equal competitive opportunities between contracting states and has been a standard in the field of trade, investment and other areas of economic co-operation. Although its application to these fields of law is widely accepted, the principle has still not been welcomed in direct Community tax law. The European Court of Justice has for quite a long period of time avoided the topic, but the issue has once again been brought to the Court's attention in three similar cases. Perhaps the question will be decided once and for all in these pending cases. There are many supporters of a 'limited'... (More)
- The Most-Favoured-Nation treatment has been a common feature in international economic relations for a long period of time. The principle provides for equal competitive opportunities between contracting states and has been a standard in the field of trade, investment and other areas of economic co-operation. Although its application to these fields of law is widely accepted, the principle has still not been welcomed in direct Community tax law. The European Court of Justice has for quite a long period of time avoided the topic, but the issue has once again been brought to the Court's attention in three similar cases. Perhaps the question will be decided once and for all in these pending cases. There are many supporters of a 'limited' Most-Favoured-Nation treatment in the field of direct tax law. The 'believers' find that the general non-discrimination principle also applies to discrimination between non-resident taxpayers of different Member States. By not considering the Most-Favoured-Nation standard as a principle of its own, the consequences are limited. The treatment merely is another form of discrimination and the ordinary justification grounds are applicable. The condition that the two non-residents must be in a similar situation counteracts far-reaching effects. The Limitation on Benefits articles, included in several international tax treaties, have a purpose of avoiding tax treaty shopping. The criteria of the articles are designed to ensure that the residents of a contracting state are not used as conduit companies for shareholders resident in less favourable tax regimes. Many scholars believe that these provisions violate the fundamental freedoms enshrined in the Treaty establishing the European Community. The qualification tests included in the Limitation on Benefits clauses are not a proportionate means to avoid tax evasion or tax avoidance. The main purpose of the thesis is to analyse how the Most-Favoured-Nation doctrine and the Limitation on Benefits articles interact. If a taxpayer claims entitlement to a treaty benefit, both according to the Most-Favoured-Nation principle and by annulment of a Limitation on Benefits provision, which one prevails and can the two features lead to different results? The conclusion that the author makes in this paper is that if a Limitation on Benefits clause is violating Community law, the whole tax treaty will be annulled. The parties then have a possibility to re-negotiate the conditions of the agreement without leaving the treaty benefits entirely undefended. The 'limited' Most-Favoured-Nation principle extends the applicability of a specific tax treaty benefit in a specific case, not all treaty benefits in every case, unlike the result of a possible annulment of a discriminatory Limitation on Benefits clause. If a discriminatory Limitation on Benefits article is found justified by Community law, but the Most-Favoured-Nation treatment extends a certain tax treaty benefit in the same agreement, the latter more specific non-discrimination principle must prevail. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1563173
- author
- Zester, Anitza
- supervisor
- organization
- year
- 2005
- type
- H3 - Professional qualifications (4 Years - )
- subject
- keywords
- EG-rätt, Skatterätt
- language
- English
- id
- 1563173
- date added to LUP
- 2010-03-08 15:55:31
- date last changed
- 2010-03-08 15:55:31
@misc{1563173,
abstract = {{The Most-Favoured-Nation treatment has been a common feature in international economic relations for a long period of time. The principle provides for equal competitive opportunities between contracting states and has been a standard in the field of trade, investment and other areas of economic co-operation. Although its application to these fields of law is widely accepted, the principle has still not been welcomed in direct Community tax law. The European Court of Justice has for quite a long period of time avoided the topic, but the issue has once again been brought to the Court's attention in three similar cases. Perhaps the question will be decided once and for all in these pending cases. There are many supporters of a 'limited' Most-Favoured-Nation treatment in the field of direct tax law. The 'believers' find that the general non-discrimination principle also applies to discrimination between non-resident taxpayers of different Member States. By not considering the Most-Favoured-Nation standard as a principle of its own, the consequences are limited. The treatment merely is another form of discrimination and the ordinary justification grounds are applicable. The condition that the two non-residents must be in a similar situation counteracts far-reaching effects. The Limitation on Benefits articles, included in several international tax treaties, have a purpose of avoiding tax treaty shopping. The criteria of the articles are designed to ensure that the residents of a contracting state are not used as conduit companies for shareholders resident in less favourable tax regimes. Many scholars believe that these provisions violate the fundamental freedoms enshrined in the Treaty establishing the European Community. The qualification tests included in the Limitation on Benefits clauses are not a proportionate means to avoid tax evasion or tax avoidance. The main purpose of the thesis is to analyse how the Most-Favoured-Nation doctrine and the Limitation on Benefits articles interact. If a taxpayer claims entitlement to a treaty benefit, both according to the Most-Favoured-Nation principle and by annulment of a Limitation on Benefits provision, which one prevails and can the two features lead to different results? The conclusion that the author makes in this paper is that if a Limitation on Benefits clause is violating Community law, the whole tax treaty will be annulled. The parties then have a possibility to re-negotiate the conditions of the agreement without leaving the treaty benefits entirely undefended. The 'limited' Most-Favoured-Nation principle extends the applicability of a specific tax treaty benefit in a specific case, not all treaty benefits in every case, unlike the result of a possible annulment of a discriminatory Limitation on Benefits clause. If a discriminatory Limitation on Benefits article is found justified by Community law, but the Most-Favoured-Nation treatment extends a certain tax treaty benefit in the same agreement, the latter more specific non-discrimination principle must prevail.}},
author = {{Zester, Anitza}},
language = {{eng}},
note = {{Student Paper}},
title = {{Most-Favoured-Nation Treatment in an EC Tax Law Perspective - A Special Focus on the Principle's Effect on the Limitation on Benefits Clauses in Double Taxation Conventions}},
year = {{2005}},
}