Articles 24(4) and 24(5) of the OECD Model Applied to Domestic Thin Capitalization Rules

Abstract

This article discusses the potential infringement of articles 24(4) and 24(5) of the OECD Model by domestic thin capitalization rules. Given the purpose of such rules, they are often targeted at cross-border transactions, as a result of which tax treaty discrimination issues may arise. However, because of the intricate relationship between the non-discrimination provisions and the treaty provisions governing the arm’s length nature of transactions between related enterprises, the discrimination analysis may not always be entirely straightforward.