Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘tax treaty benefits’

Chile: Treaty Requirements

Chile’s Internal Revenue Service (IRS) recently issued Resolution No. 48, prescribing rules for eligibility from a tax treaty including a sworn statement from the resident country beneficiary.

EY’s Global Tax Alert provides the relevant details:

Click to access 2015G_CM5654_Chile%20issues%20guidance%20on%20statement%20required%20to%20benefit%20from%20a%20Tax%20Treaty.pdf

Key observations;

  • A certificate of residence is required to be issued by the Competent Authority of the recipient jurisdiction.
  • A sworn / notarized statement must be provided, with the statement date requiring conformity with the month in which amounts are paid.

Failure to provide the requisite documents will allow the IRS to collect the amounts that should have been withheld, absent treaty benefits, in addition to fines.

Countries are placing formalistic and dissimilar requirements to receive treaty benefits, thereby requiring advance planning and awareness of treaty eligibility.  Such mechanisms continue to add to the international tax complexity for obtaining tax treaty benefits.

OECD BEPS & EU Case Law: Uncertainty ahead

PwC has published a very informative article addressing the impact of EU case law, exemplified by cases from the Court of Justice of the European Union, on the OECD BEPS international tax proposals.  There may be additional uncertainty by EU Member States after the OECD BEPS measures are announced due to the “fundamental freedoms” in the Treaty on the Functioning of the European Union (CJEU), State Aid principles and the EU direct tax initiatives, including the Parent-Subsidiary Directive.  The link to the article is included for reference:

Click to access pwc-eu-beps-july-2014.pdf

The article provides excellent references to current EU Law concepts, including the basic premise that domestic legislation must be compliant with EU law.  Additionally, the OECD proposals for hybrid mismatch transactions, tax treaty abuse and harmful tax practices are discussed against the backdrop of EU legislation.

The article concludes with the takeaway: “The implementation of OECD BEPS proposals within the EU/EEA Member States will only be possible to the extent that those proposals are also compliant with EU Law.  So far, however, little attention seems to have been paid to potential EU Law issues in the OECD’s draft discussion papers, so that EU/EEA Member States might actually risk breaching EU Law.  As a result, companies doing business in the EU/EEA will be faced with legal uncertainty about the lawfulness of implemented OECD BEPS proposals in domestic law or tax treaties.”

As an additional observation, there is a likelihood that the domestic legislation enacting OECD BEPS proposals will not be consistent for each Member State, thereby the legal uncertainty should be reviewed for each Member State as domestic legislation and OECD proposals are implemented.

 

 

 

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