UK treaty tiebreaker guidelines raise concerns
HM Revenue & Customs on 14 January published new guidelines (INTM120085) on nonstandard treaty tiebreakers that could have an impact on the UK’s tax treaties with the United States, Canada, and the Netherlands. The update to the HMRC International Manual covers cases in which there is no residence tiebreaker clause and the matter must be settled by means of the competent authority procedure (such as under the US, Canada, and Netherlands treaties).
Article 4(3) of the 2010 OECD model tax convention reads as follows:
Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.
Article 4(4) of the 2008 Netherlands-U.K. tax treaty (the treaty was clarified by a 2010 competent authority agreement ) reads as follows:
Where by reason of the provisions of paragraph 1 of this Article a person other than an individual is a resident of both Contracting States, then the competent authorities of the Contracting States shall determine by mutual agreement the Contracting State of which that person shall be deemed to be a resident for the purposes of this Convention. In the absence of a mutual agreement by the competent authorities of the Contracting States, the person shall not be considered a resident of either Contracting State for the purposes of claiming any benefits provided by the Convention, except those provided by Article 21, Article 24 and Article 25…
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