US Model Tax Convention Changes To Tackle Inversions

by Mike Godfrey, Tax-News.com, Washington

25 May 2015

On May 20, 2015, the US Department of the Treasury released for public comment draft updates to the US Model Income Tax Convention, including provisions to deny treaty benefits to companies that change their tax residence via inversion transactions.

The Treasury said other changes are intended to ensure that the United States is able to maintain the balance of benefits negotiated under its treaty network as the tax laws of its treaty partners change over time.

Introducing the changes, Deputy Assistant Secretary for International Tax Affairs Robert B. Stack said: "The draft provisions we are releasing for comment today reflect the fact that the tax regimes of our treaty partners are more likely to change over time than they have in the past, and that they sometimes change in ways that encourage base erosion and profit shifting or base erosion and profit shifting (BEPS), by multinational firms. Treaties exist to eliminate double taxation, not to create opportunities for BEPS, and today's updates fully take account of the new international tax environment. The draft provisions also articulate steps that would help prevent our treaty network from encouraging inversion transactions."

One set of draft provisions addresses issues arising from "special tax regimes," which provide very low rates of taxation in certain countries in particular to mobile income, such as royalties and interest. The Treasury identified that this income can easily be shifted around the globe through deductible payments that can erode the US tax base. The proposals are intended to avoid instances of "stateless income" or double non-taxation, whereby a taxpayer uses provisions in a US tax treaty, combined with special tax regimes, to pay no or very low tax in the treaty partner countries.

The second set of draft provisions is aimed at reducing the tax benefits from a corporate inversion by imposing full withholding taxes on key payments such as dividends and base stripping payments, including interest and royalties, made by US companies that are "expatriated entities" as defined under the Internal Revenue Code.

Last, revisions are proposed to prevent residents of third-countries from inappropriately obtaining the benefits of a bilateral tax treaty. These include more robust rules on the availability of treaty benefits for income that is not subject to tax by a treaty partner because it is attributable to a permanent establishment located outside the country, and the ability of a company to make "excessive base eroding payments."

Recognizing that multinationals often have global operations dispersed through many subsidiaries around the globe, the Model Convention for the first time contains a so-called "derivative benefits" rule. The rule is an additional method of qualifying for treaty benefits based on a broader concept of ownership that includes certain third-country ownership.

While not among the draft treaty provisions released, the next US Model will include a new Article to resolve disputes between tax authorities through mandatory binding arbitration.

The Model Convention is the baseline text used by the Treasury when negotiating tax treaties and was last updated in 2006.

2015年5月20日，美国财政部发布美国所得税协定范本的修订草案并公开征求意见，对于通过倒置交易( Inversion Transaction) 改变税收居所的公司，草案特别加入相关条款否定其税收协定待遇。

美国财政部表示，其他修订内容旨在确保即使税收协定缔约对方税法出现变动，美国也能够在其税收协定网络下维持所协商的待遇的平衡。

草案包含了一系列条款专门解决由“特殊税制”所引发的问题，即某些国家提供非常低的税率，特别是针对特许权使用费、利息等流动收入。美国财政部认为这些收入可以通过费用扣除轻易地在全球范围内转移，从而侵蚀美国的税基。修订草案旨在避免“无国籍收入”或者双重不征税，即纳税人利用美国税收协定的条款结合特殊税制，在缔约国缴纳非常低的或者不缴纳税款。

对于被美国税收法典认定为“外国实体”的美国公司，修订草案提出对其股息、利息、特许权使用费等重要支付款项全面征收预提税，旨在降低利用企业倒置享受的税收待遇。

最后，修订草案还提议阻止第三国的居民从双边税收协定中不恰当获取优惠待遇。具体措施包括，由于归属于境外常设机构而不被缔约对方征税的收入，将对其税收协定待遇的适用性制定更加有效力的规则。

美国所得税协定范本是美国财政部协商税收协定的基准文本，上一次修订是2006年。