Double Taxation Treaties Research Articles

The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows by Karl P. Sauvant and Lisa E. Sachs (eds)

The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows by Karl P. Sauvant and Lisa E. Sachs (eds)

Tax Authorities Issue Circular on Interpretation of Double Tax Treaties

Circular 75 was issued by the Chinese tax authorities on 1 September 2010. It provides China’s first detailed guidance on the interpretation of each article of Chinese double tax treaties. While this Circular specifically deals with the Singapore–China treaty, it also contains an introductory paragraph which extends the explanations within it to all other Chinese treaties with similar articles.

Competing for Scarce Foreign Capital: Spatial Dependence in the Diffusion of Double Taxation Treaties

Recent research suggests that double taxation treaties (DTTs) increase bilateral foreign direct investment (FDI). However, entering such a tax treaty is not unambiguously favourable for both partners if their bilateral FDI positions are asymmetric. Due to the usual bias towards residence-based taxation in DTTs, net-capital importers can face a considerable loss of tax revenues when entering these treaties. Nevertheless, there is an ever denser and growing global network of such treaties. This article argues that net-capital importing countries are caught in a prisoners’ dilemma: collectively, they would be better off refusing to sign DTTs, but each one has an incentive to sign DTTs to gain a competitive advantage. Countries will look toward and be influenced by the policy choices of other focal countries and will follow their DTT activity. We find evidence for such spatial dependence in our analysis of DTT diffusion in a global sample over the period 1969 to 2005. Dyads are more likely to sign a DTT the more DTTs have previously been concluded by the regional peers of the dyad members as well as by other countries who compete with at least one of the dyad members in terms of export product structure.

Further Discrimination of Permanent Establishments: Tax Incentive to Maintain or Create Employment in Spain

The Spanish 2010 General State Budgets Act contained an important innovation consisting of the incorporation in the Spanish tax system of a new tax incentive to maintain or create employment. The fact that this tax incentive is not applicable to permanent establishments (PE) raises the question of whether it constitutes an infringement of the non-discrimination principle that limits the freedom of establishment. In general, the principle of nondiscrimination has had a significant impact on the Spanish tax system, mainly in relation to direct taxes and, in particular, on PE. The case we shall now analyse is an example of this type of discrimination, which is prohibited both under the non-discrimination of PE clause envisaged in double taxation treaties and pursuant to the Community freedom of establishment.

The Tenability of the Dutch Preservative Tax Assessment in Relation to Pension Benefits

The authors argue that the rulings of the Dutch Supreme Court, in which its substantive opinion on the tenability of the preservative tax assessment in relation to pension benefits is expressed, do not leave any scope for the remedial legislation implemented as a response thereto. The authors explain that the legislator has acted in violation of the principle of good faith that needs to be taken into account when interpreting and applying double tax treaties. According to the authors, the way to prevent that the entitlements accrued tax-efficiently are appropriated for other purposes than the intended purposes is by changing the bilateral tax treaties. This article includes an overview of the consequences of the rulings and the amendments to the law in various situations.

Do International Investment Agreements promote Foreign Direct Investment?

The main objective of this study is to empirically evaluate the influences of IIAs on FDI patterns in the developing countries. Our study primarily focuses on the effects of four types of international instruments: Bilateral Investment Treaties (BITs), the avoidance of Double Taxation Treaties (DTTs), Preferential Trade Agreements (PTAs) and World Trade Organization (WTO). We estimate the gravity equation for bilateral FDI stock from seven source countries and 122 developing host countries over the period 1966-2005. Our results show that foreign investors positively respond to BITs, DTTs, PTAs and the WTO agreement.

Statutory Corporate Tax Rates and Double-Taxation Treaties as Determinants of Multinational Firm Activity

Statutory Corporate Tax Rates and Double-Taxation Treaties as Determinants of Multinational Firm Activity, 10.1628/001522111X588754, Jahrgang 67 (2011) / Heft 2, 0015-2218 (1614-0974), Public Finance Analysis

SAUVANT, KARL P.; SACHS, LISA E. (2009). The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows. Oxford University Press.

SAUVANT, KARL P.; SACHS, LISA E. (2009). The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows. Oxford University Press.

Cross Border Investment, Trade and Impact on Revenue in the Context of the World Trade Organisation: A Case of Nepal

In the past, foreign investment was largely regulated by domestic laws and policies. In general, the only international rules that applied to some aspects of foreign investment were rules of customary international law, and their application was purely exceptional. With the adoption of bilateral investment treaties, an international legal framework started to emerge. Both developed and developing countries were eager to negotiate trade and investment rules in order to encourage cross-border investment. To date, over 2300 bilateral investment treaties (BITs) and double taxation treaties (DTTs) have been concluded across the globe. Since 2000 there has been a slight change in the trend. Countries are engaged in entering into bilateral free trade agreement (BFTAs) and regional free trade agreements (RFTAs). This trend might challenge the pace of multilateralism espoused especially under the WTO.

THE IMPACT OF DOUBLE TAXATION TREATIES ON FOREIGN DIRECT INVESTMENT: EVIDENCE FROM LARGE DYADIC PANEL DATA

To increase inward foreign direct investment (FDI), policy makers increasingly resort to the ratification of double taxation treaties (DTTs). However, the effectiveness of DTTs in inducing higher FDI is still open to debate, as the empirical evidence of existing studies is anything but conclusive. In contrast to earlier approaches, we use a largely unpublished dataset on bilateral FDI stocks, covering a much larger and more representative sample of host and source countries. Controlling for standard determinants of FDI and employing various econometric specifications, our results indicate that DTTs do lead to higher FDI stocks and that the effects are substantively important as well.

Double Taxation Treaties: The Autonomous Interpretation Method in German and English Law; as Demonstrated by the Case of the Silent Partnership

The authors explore the current state of the case law in Germany and England regarding the silent partnership in international taxation. The main concern is the interpretation and application of the double taxation treaty as a bilateral convention: how will German courts and fiscal authorities react to the Memec case series in view of existing case law on double taxation convention (DTCs) with other countries? Will they respect the English view on the qualification proceeds from a German ‘atypical’ silent partnership under the DTC or will they continue to apply an outdated and arguably ill-founded reasoning? The discussion wants to contribute to the evolution of a truly and much needed international legal doctrine within an ever-expanding European Union.

The Battle against Tax Havens Rages on in Kazakhstan . . . Tax Treaty Partners Being Victimized

This article analyses Controlled Foreign Company (CFC) rules in Kazakhstan which are becoming a topic of growing concern among Kazakh tax practitioners, businessmen and enterprises with international structures since as of 2009 the CFC legislation became applicable to Kazakh resident individuals and went as far as blacklisting several Kazakhstan treaty partners. The authors review the evolution of the CFC legislation over the last fifteen years and highlight key elements of the current rule (including situations of multiple taxation and non-taxation) as well as interaction of domestic CFC provisions with treaty law, using as examples Kazakhstan-Switzerland double tax treaty and EU-Kazakhstan Partnership and Cooperation Agreement

The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows

Contributors Foreword: Andreas F. Lowenfeld Preface: John H. Dunning BITs, DTTs and FDI flows: an Overview: Lisa E. Sachs and Karl P. Sauvant PART I: Introduction A Brief History of International Investment Agreements Kenneth J. Vandevelde The Framework of Investment Protection: The Content of BITs Peter Muchlinski Explaining the Popularity of Bilateral Investment Treaties, Andrew T. Guzman Double Tax Treaties: An Introduction Reuven S. Avi-Yonah PART II: Exploring the Impact of Bilateral Investment Treaties on Foreign Direct Investment Flows Do BITs Really Work: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain Jeswald W. Salacuse and Nicholas P. Sullivan Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis Tim Buthe and Helen V. Milner Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries? Eric Neumayer and Laura Spess The Impact of Bilateral Investment Treaties on Foreign Direct Investment Peter Egger and Michael Pfaffermayr New Institutional Economics and FDI Location in Central and Eastern Europe Robert Grosse and Len J. Trevino Do Investment Agreements Attract Investment? Evidence from Latin America Kevin P. Gallagher and Melissa B.L. Birch The Global BITs Regime and the Domestic Environment for Investment Susan Rose-Ackerman The Impact on Foreign Direct Investment of BITs UNCTAD Do Bilateral Investment Treaties Attract FDI? Only a Bit And They Could Bite Mary Hallward-Driemeier Do BITs Really Work? Revisiting the Empirical Link between Investment Treaties and Foreign Direct Investment Jason Yackee Bilateral Investment Treaties and Foreign Direct Investment: Correlation Versus Causation Emma Aisbett Why Do Developing Countries Sign BITs? Deborah L. Swenson PART III: Exploring the Impact of Double Taxation Treaties on Foreign Direct Investment Flows Do Bilateral Tax Treaties Promote Foreign Direct Investment? Bruce A. Blonigen and Ronald B. Davies The Effects of Bilateral Tax Treaties on U.S. FDI Activity Bruce A. Blonigen and Ronald B. Davies The Impact of Endogenous Tax Treaties on Foreign Direct Investment: Theory and Empirical Evidence Peter Egger, Mario Larch, Michael Pfaffermayr and Hannes Winner Host-Country Governance, Tax Treaties and U.S. Direct Investment Abroad Henry J. Louie and Donald J. Rousslang Tax Treaties for Investment and Aid to Sub-Saharan Africa: A Case Study Allison D. Christians It's All in the Timing: Assessing the Impact of Bilateral Tax Treaties on U.S. FDI Activity Daniel L. Millimet and Abdullah Kumas Do Double Taxation Treaties Increase Foreign Direct Investment to Developing Countries? Eric Neumayer PART IV: Exploring the Impact of Tax and Investment Treaties on Foreign Direct Investment Flows The Effect of Tax and Investment Treaties on Bilateral FDI Flows to Transition Economies Tom Coupe, Irina Orlova and Alexandre Skiba Selected Bibliography on Bilateral Investment Treaties and Double Taxation Treaties Lisa E. Sachs

The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (Karl P. Sauvant and Lisa E. Sachs eds., Oxford 2009)

Journal Article The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (Karl P. Sauvant and Lisa E. Sachs eds., Oxford 2009) Get access Mark E. Feldman Mark E. Feldman Search for other works by this author on: Oxford Academic Google Scholar ICSID Review - Foreign Investment Law Journal, Volume 24, Issue 1, Spring 2009, Pages 296–299, https://doi.org/10.1093/icsidreview/24.1.296 Published: 01 March 2009

Current Developments of Contributions to US Pension Plans under German Tax Law

This article analyses the current tax developments of contributions to US pension plans (e.g., 401(k) – plan) under German tax law from a domestic tax law and from a double tax treaty perspective, whereas the main emphasis is put on the employer contributions. There have been two fundamental incidents that have had major impact for the current German domestic tax law and double tax treaty treatment of employer contributions to US pension plans: firstly, in a decision dating 5 July 2007, the German Federal Court of Finance has ruled for the first time that employer contributions to US pension plans should be qualified as employment income under German domestic tax law. Secondly on 28 December 2007, a new Article 18A Double Tax Treaty Germany/ USA (in the following: ‘DTT Germany/USA’) concerning the treatment of pension plans for tax treaty purposes was introduced (partly) retroactively as of 1 January 2007 within the adoption of a new protocol amending the DTT Germany/USA. This article analyses and evaluates the impacts and changes under German domestic tax law according to the aforementioned incidents, starting with a short overview of the US domestic taxation of US pension plans which is important for understanding the issues regarding the German domestic tax law and double tax treaty treatment.

The Autonomous Interpretation Method in International Tax Law: The 'Atypical' Silent Partnership under the German-British Double Taxation Treaty

An abridged version of this paper has been published in German by Europaische Zeitschrift fur Wirtschaftsrecht European Journal of Business Law (EuZW) in November 2008. Dr Andreas Knebel is a partner with White & Case in Frankfurt Main, Germany. An English version has been published in 2010 in Intertax, Vol.38 (13), 136-152. The authors explore the current state of the case law in Germany and England regarding the silent partnership in international taxation. The main concern is the interpretation and application of the Double Taxation Treaty as a bilateral convention: how will German courts and fiscal authorities react to the Memec case series in view of existing case law on DTTs with other countries? Will they respect the English view on the qualification proceeds from a German ''atypical'' silent partnership under the DTT or will they continue to apply an outdated and arguably ill founded reasoning? A recent German case involving the DTT with the US shows a move into the right direction. The discussion wants to contribute to the evolution of a truly and much needed international legal doctrine within an ever-expanding European Union given the European tax law is still only rudimentary present in the acquis. The text is in German, a summary of the thoughts can be found in the International commercial harmonization and national resistance - the development and reform of transnational commercial law and its application within national legal culture (2009) in Theory and Practice of Harmonization, forthcoming (Chapter in WG Hart Workshop 2008 conf. paper collection June 2011 by Edward Elgar publishers).

Hybrid finance and double taxation treaties

Company finance is traditionally divided into equity and debt, but this does not truly capture the great diversity of the financial instruments available, and hybrid instruments incorporate elements of both equity and debt. From a tax perspective, the classification of hybrid instruments as equity or debt is crucial. This article examines the circumstances in which the yield of a hybrid financial instrument can or must be qualified as either a dividend or interest under tax treaties irrespective of the treatment under the domestic laws of the contracting states.

The Dominant Voices in Double Taxation Agreements: A Critical Analysis of the “Dividend” Article in the Agreement between Uganda and the Netherlands

AbstractIn a bid to attract foreign investment, Third World countries are increasingly concluding Double Taxation Treaties with capital-rich countries, based on either the UN model treaty convention or the OECD model. Using the example of the dividend Article in the Uganda-Netherlands treaty, the discussion in this article illustrates the increased use of tax treaties to shift income from developing to developed countries. By essentially reducing the tax rate on dividend income to nil, that treaty significantly erodes Uganda's tax base. Such agreements raise concern, especially when one takes into account the fact that investment decisions are often driven by factors external to tax, meaning that reduced tax rates do not guarantee increased investments. Worse still, because developing countries are net capital importers, the benefits accruing from such treaties are often one-sided. The paper calls for a rethinking and redrafting of the UN model convention to ensure that the taxing rights of Third World countries are strengthened. In addition, since the practical reality is that developed countries often base their agreements (even with developing countries) on the OECD model, there is a need to amend the latter model to take this reality into account.

O vlastnostech metod stanovení transferových cen

V tomto článku v první řadě uvádíme stručný přehled literatury na poli návrhů metod eliminace daňových úniků. Naneštěstí legislativa a politické podmínky (smlouvy na zamezení dvojího zdanění a daňová soutěž) znemožňují užití některých velmi užitečných designů daňového systému, navrhovaných v akademické literatuře. Proto jsme se zaměřili na vlastnosti metod stanovení transferových cen doporučovaných ve směrnici OECD k transferovým cenám - Cost+ metoda, comparable resale price method (CRP), profit split method (PSM) a comparable uncontrolled price method (CUP). Použili jsme neoklasického mikroekonomického modelu firmy a simulační analýzy (náhodné funkce nákladů a tržeb). Zjistili jsme, že PSM a CRP s fixním diskontem způsobují vcelku rozsáhlé distorze v optimálním množství produkce finálního výrobku (a tím také meziproduktu). PSM také selhává na nestabilitě ziskovosti v čase mezi navazujícími odvětvími. Nejnepříjemnější vlastností Cost+ a CRP, které ovšem při použití procentních přirážek (srážek) nevedou k distorzím produktovaného množství, je že jsou velmi citlivé na kvalitu databáze marží, kterou v takových případech daňová autorita používá. Citlivé jsou zejména daně ze zisku, zatímco DPH je přirozeně méně citlivá, proto by důraz na DPH v rámci daňových příjmů státního rozpočtu mohl být částečným řešením problému zdanění nadnárodních koncernů.

Cross–border direct tax issues of investment funds from the perspective of European law

This article addresses the issue of discriminatory taxation of investments through investment funds. In particular, the article seeks to demonstrate that national legislations of Member States,while trying to grant neutral treatment to such investments as compared to direct investments, create sometimes obstacles to their internationalization. Furthermore, it tries to find solutions in the ECJ Case Law (with a special emphasis on Orange Smallcap) that might help mitigating or solving such obstacles. The author analyzes several scenarios where he tries to interact EC Law, double tax treaties and domestic law. To achieve that purpose, the author goes through several scenarios where investment funds, investors and investments are in different Member States or in third states and tries to detect restrictions or discriminations in both the source and home State, giving special emphasis to the comparability tests and to possible justifications.