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Contents5. Article 13 of the United Nations Model Convention andtreaty practices among developing countries with respect totaxing capital gains ...................................1335.1 The definition of “immovable property”. ............1355.2 Movable property part of a permanent establishment . 1365.3 Entities holding immovable property directly orindirectly .......................................1375.4 Substantial participation in a company. .............1395.5 Residual taxing power ............................1406. Preventing avoidance of the tax on capital gains bynon-residents ........................................1426.1 Treaty shopping .................................1436.2 Indirect transfers ................................1446.3 Issuance of new shares and corporate reorganizations. 1517. Taxing former residents on capital gains .................1528. Conclusion ..........................................153Chapter IVLimiting interest deductions. ................................1551. Background .........................................1561.1 Debt and equity. .................................1561.2 Use of debt by taxpayers ..........................1571.3 Related-party debt in capitalizing an enterprise ......1591.4 Branch operations. ...............................1622. Non-tax concerns regarding excessive debt. ..............1633. Tax considerations regarding thin capitalization andrelated concerns ......................................1643.1 Determining whether a taxpayer has excessive debt. ..1653.2 Interest allocable to exempt or deferred income ......1723.3 Is all interest equal? ..............................1743.4 Interest paid to related parties .....................1763.5 Withholding taxes ...............................1794. Branch operations ....................................1825. Relevance of tax treaty provisions. ......................1846 Conclusion ..........................................184Bibliography ..............................................186xv
ContentsChapter VNeutralizing effects of hybrid mismatch arrangements . . . . . . . . . . 1871. Determining the scope of the problem. ..................1911.1 Income tax fundamentals .........................1911.2 Mismatches in respect of payments and the fundamentalfeatures of payments. .............................1951.3 Mismatches in respect of earning activities and theprovision of resources ............................2021.4 Mismatches in respect of persons and personalcharacteristics ...................................2072. What is covered by OECD Action 2 in the OECD ActionPlan on BEPS ........................................2102.1 Hybrid mismatch arrangements. ...................2112.2 Hybrid financial instruments and transfers ..........2172.3 Hybrid entity payments ...........................2192.4 Reverse hybrid and imported mismatches ...........2223. How Action 2 in the OECD Action Plan on BEPS proposesto deal with the problem. ..............................2253.1 General approach ................................2253.2 Actions by payer/source/host State .................2323.3 Actions by investor/residence/home State ...........2363.4 Actions by intermediate State ......................2384. Other steps that may be taken ..........................2394.1 Stepping back: the bigger picture ...................2424.2 Joint steps: separating source and residence tax bases . 2454.3 Source-State steps: plugging the gaps ...............2464.4 Residence-State steps: do not discourage domesticinvestment ......................................2505. Conclusion ..........................................253Annex I:Categorizing hybrid mismatch examples ......................257Annex II:Effects of other steps on the 13 examples and OECD figures ......260xvi
Page 1 and 2: United Nations Handbookon Selected
Page 3 and 4: Copyright © June 2015United Nation
Page 5 and 6: PrefaceIn recent years, internation
Page 7 and 8: Acknowledgements(Chile); Mr. Wolfga
Page 9 and 10: IntroductionIn follow-up, the Subco
Page 12 and 13: ContentsPreface ...................
Page 14 and 15: ContentsChapter IITaxation of incom
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Page 20 and 21: Contents4. Options for developing c
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Hugh J. Ault and Brian J. ArnoldThe
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Chapter IITaxation of income from s
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Taxation of income from servicesnot
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Taxation of income from servicespay
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Chapter IIITaxation of non-resident
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Taxation of non-residents’ capita
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Chapter IVLimiting interest deducti
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Limiting interest deductionspartial
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Limiting interest deductionsSpecifi
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Limiting interest deductions3.1.3.3
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Limiting interest deductionsas divi
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Limiting interest deductions‣ ¾
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Limiting interest deductionsconnect
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Limiting interest deductionslending
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Limiting interest deductionsOn the
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Limiting interest deductionsOECD Mo
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Limiting interest deductionsHowever
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Chapter VNeutralizing effects of hy
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Neutralizing effects of hybrid mism
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Peter A. HarrisOwnership of assetsE
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Peter A. HarrisAnnex IIEffects of o
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Peter A. HarrisA.1.7 The mismatch i
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Peter A. HarrisSubject to tax treat
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Peter A. HarrisA.2.9 The mismatch i
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Peter A. HarrisA.3 Mismatches in re
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Peter A. HarrisA.3.7 Figure 17 in t
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Peter A. Harrisa PE in the jurisdic
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Chapter VIPreventing tax treaty abu
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Preventing tax treaty abuseModel Ta
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Preventing tax treaty abuseand appr
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Preventing tax treaty abuseFinally,
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Preventing tax treaty abuse‣ ¾ T
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Preventing tax treaty abusehands of
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Preventing tax treaty abusefor the
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Preventing tax treaty abuseintended
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Preventing tax treaty abuseThe Comm
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Preventing tax treaty abuseOECD cla
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Preventing tax treaty abuseSubparag
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Preventing tax treaty abusethe Stat
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Preventing tax treaty abuseSubdivis
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Preventing tax treaty abuseii)less
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Preventing tax treaty abuse2.3.1.2
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Preventing tax treaty abusesubparag
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Preventing tax treaty abuseby seven
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Preventing tax treaty abuseboth Sta
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Preventing tax treaty abusenon-taxa
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Preventing tax treaty abuseare mean
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Preventing tax treaty abuseOne of t
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Chapter VIIPreventing avoidance of
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Preventing avoidance of permanent e
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Chapter VIIIProtecting the tax base
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Eric M. Zoltincentives are bad in t
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Eric M. Zoltoption, and taxes are j
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Eric M. ZoltWhile tax incentives ca
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Eric M. Zoltdisguised tax incentive
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Eric M. Zoltif the foreign investor
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Eric M. ZoltNew foreign direct inve
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Eric M. Zoltto avoid paying taxes o
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Eric M. Zoltshould be the monitorin
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Eric M. Zolt2.2 Design consideratio
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Eric M. Zoltwith the creation of a
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Eric M. Zolt2.2.1.3 Tax holidaysIn
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Eric M. ZoltInvestment allowances a
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Eric M. Zoltmechanism, investors ha
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Eric M. Zolt2.2.2.6 Transfer pricin
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Eric M. Zoltthat offers tax privile
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Eric M. Zolt6. Calculate the amount
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Eric M. ZoltFor an investor, the to
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Eric M. Zoltthe right of source cou
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Eric M. Zoltincome either when earn
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Eric M. Zolt‣ ¾ “Broad approac
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Eric M. ZoltThe insight here is tha
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Eric M. Zoltattributable to develop
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Chapter XTransparency and disclosur
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Transparency and disclosure1.4 Perv
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Transparency and disclosureis inten
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Transparency and disclosureon the O
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Transparency and disclosureand conc
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Transparency and disclosureimproved
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Transparency and disclosurethey fac
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Diane Ringunder review. To assist i
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Diane Ring(b) Reporting oversight:
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Diane Ringpermanent establishment (
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Diane RingBusiness organizations, i
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Diane RingThere is, however, anothe
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Diane Ringin a jurisdiction will be
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Diane Ring3.4 Disclosure of aggress
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