Archive for OECD

OECD Model Treaty Post Series: Permanent Establishment, Part III

Continuing the look at the OECD Model Treaty’s definition of permanent establishment, we find the treaty specifically stating the following are PEs in Article 5, Section 2:

2. The term “permanent establishment” includes especially
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop, and
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. Read More
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Australian Serious Tax Crime Conviction Rate Soars: Offshore Schemes Targeted

The Australian Taxation Office (ATO) has since July 2006 prosecuted 467 serious fraud tax evasion cases. The average conviction rate to September 2013 is 98%. Of these convictions, 75% have resulted in custodial sentences of more than 12 months. To date, the custodial sentence rate for the 2013-14 tax-year is 100%.

Reparation orders and fines have also been recorded in the majority of these cases, many initiated as part of the cross-agent taskforce Wickenby Project. This project focuses on arrangements the taskforce considers to involve offshore tax evasion utilising what the ATO refers to as “secrecy havens”. Read More

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The OECD Model Tax Treaty – Permanent Establishment – Part II

Today I’m going to continue looking at the OECD model tax treaty’s definition of permanent establishment. Let me start with, Article 5, Section 2, which states:

2. The term “permanent establishment” includes especially:

a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop, and
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. Read More
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OECD Model Treaty Post Series – Permanent Establishment Part I

Today, I’m going to move forward and look at the OECD Model Treaty’s rules on permanent establishment. This is important for a simple reason: in order to exert its taxing rights over a transaction or individual, a jurisdiction must either prove the person/business is a resident (which we covered over the last few weeks) or prove the transaction took place within the jurisdiction’s borders. A permanent establishment is where a transaction occurs; hence the determination of a permanent establishment is of vital importance.

Let’s start with the basic definition: “For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.” The commentary adds important, further clarification. Read More

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OECD Model Treaty Post Series – Residence, Part II

Last week, I looked at the residence provisions of the OECD Model Tax Treaty for individuals. This week, I’ll take a look at the provisions for non-individuals.

Before moving forward, however, it is important to briefly diverge into an area of academic discussion: partnerships, and how the OECD treaty deals with these business entities. Under Article 1, the treaty applies to “persons who are residents of one or both of the contracting states.” This leads to the question of, “how does the treaty deal with a pass-through entity?” Is the entity actually a separate company or is the entity a collection of its partners? If the latter, how do we deal with that? While this might seem like an academic debate, in reality it’s not, as some jurisdictions treat these business entities in a very different manner. The debate went so far as to have the OECD issue a paper on this Read More

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OECD Model Treaty Post Series – Residence – Part I

Article 1 of the OECD treaty states, “This Convention shall apply to persons who are residents of one or both of the Contracting States..” As such, for a person to claim treaty benefits, they must be residents. Today, I’ll focus on residence for individuals, which is covered in Article four of the treaty:

Article 1, Section 4 states,

For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does Read More

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OECD Model Treaty Post Series – Background

An Overview of the OECD Tax Treaty: Some Background

Assume that company XYZ — which is domiciled in the United States — wants to sell goods to Germany. While this looks like a great idea on paper it may wind up being counter-productive. Why? Because the transaction may be subject to double taxation. The US taxes income of its residents on a world wide basis — meaning that wherever in the world you earn money, if you are a US citizen you have to pay US tax on the earnings. In addition, Germany will also tax the transaction because it occurs within its geographic borders. So, if the US company sells a good in Germany, it will pay both a US tax and a German tax on the transaction, making this a possibly money losing proposition. Read More

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Can I Be Extradited For Commiting A Tax Crime?

treatyExtradition, the formal surrendering of a person by one country to another country in order that the fugitive may be prosecuted or punished, often depends on the existence of an extradition treaty.  While the United States has attempted extradition proceedings in the absence of a treaty, the US courts have generally not supported these attempts and so, the bite of law enforcement may be somewhat limited in the absence of an appropriate extradition treaty.

An extradition treaty is in the nature of an agreement or contract between its signatory countries.  Extradition treaties have been signed between the US and over one hundred nations throughout the world.

Most treaties contain a list of crimes for which extradition may be granted such as murder; voluntary manslaughter; rape; unlawful abortion; kidnapping; burglary; larceny; embezzlement; fraud; bribery and so on.

Modern Treaties Permit Extradition For Felony Offenses

The more modern extradition treaties embrace a so-called “dual criminality approach”. Under this approach the act in question must be a crime under the laws of both the USA and the country where the fugitive is taking refuge.  Under these treaties, generally speaking, all felonies are extraditable offenses.  Such modern treaties also delineate various classes of offenses the commission of which would not be grounds for  extradition (these include for example, military and political offenses; offenses carrying capital punishment; crimes that are punishable under only the laws of one of the treaty signatories; crimes committed outside the country seeking extradition; instances when the fugitive is a national of the country in which extradition is sought and so on). Read More

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