Article 24: Non-Discrimination
Learning Objectives: You should
1.Have a sense of the application of the associated enterprise article
2.Understand the concept of transfer pricing, the notion that profits are allocated in the way they would be between independent enterprises, and the OECD’s arm’s length principle
Relationships and Administration
Associated Enterprises
When are enterprises associated?
What are the consequences of association?
United Nations Model Double Taxation Convention between Developed and Developing Countries (2017 Update)
Article 24
Non-Discrimination
Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.
Stateless persons who are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of the State concerned in the same circumstances, in particular with respect to residence, are or may be subjected.
The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.
Except where the provisions of paragraph 1 of Article 9, paragraph 6 of Article 11, or paragraph 6 of Article 12, or paragraph 6 of Article 12A apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.
The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.
OECD Model Tax Convention on Income and on Capital (2017 Update)
Article 24
Non-Discrimination
Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.
Stateless persons who are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of the State concerned in the same circumstances, in particular with respect to residence, are or may be subjected.
The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.
Except where the provisions of paragraph 1 of Article 9, paragraph 6 of Article 11, or paragraph 4 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.
The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.
Article 24 Bibliography
American Law Institute. “Part Four: Non-Discrimination: I. Basic Concept” in Federal Income Tax Project: International Aspects of United States Income Taxation II: Proposals on United States Income Tax Treaties (Philadelphia: American Law Institute, 1992).
Ault, Hugh J and Jacques Sasseville, ‘Taxation and Non-discrimination: A Reconsideration’ (2010) 2 World Tax J 101 <https://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?referer=https://www.google.ca/&httpsredir=1&article=1290&context=lsfp>
Avery Jones, John F et al, ‘Art 24(5) of the OECD Model in Relation to Intra-Group Transfers of Assets and Profits and Losses’ (2011) 3 World Tax J 179 <https://www.jura.uni-hamburg.de/forschung/institute-forschungsstellen-und-zentren/iifs/pdf/publikationen-pdf/publikationen-luedicke/2011-art-24-5-of-the-oecd-model-in-relation-to-intra-group-transfers-of-assets-and-profits-and-losses--luedicke.pdf>
Avery Jones, John F. “The Non-discrimination Article in Tax Treaties: Part 2” (1991) 11/12 Brit Tax Rev 421.
Avi-Yonah, Reuven S., Beat It: Tax Reform and Tax Treaties (January 4, 2018). U of Michigan Public Law Research Paper No. 587; U of Michigan Law & Econ Research Paper No. 18-003. Available at SSRN: https://ssrn.com/abstract=3096879 or http://dx.doi.org/10.2139/ssrn.3096879
Baker, Philip. “Great Britain: FCE Bank PLC v. Her Majesty’s Revenue and Customs” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2011 (Alphen on the Rhine: Kluwer Law International, 2012)455 <https://www.lindeverlag.at/buch/tax-treaty-case-law-around-the-globe-2011-4419>
Baker, Philip. “United Kingdom: Group Relief” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law around the Globe 2012 (Vienna: Linde, 2013) 351.
Balco, Tomas. “Kazakhstan: ATF Case”in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2011 (Alphen on the Rhine: Kluwer Law International, 2012)499.
Bouma, Herman B & Ruth Mason. “Non-discrimination at the Crossroads of International Taxation” (2008) 93b Cahiers de Droit Fiscal Intl, online: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1021738>
Brauner, Yariv. “USA: The United Airlines Flight Attendants’ Saga Continues” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2013 (Vienna: Linde, 2014) 339.
Catherine A. Brown, "Taxation and the Cross-border Trade in Services: Rethinking Non-Discrimination Obligations" 2018 21 Fla. Tax Rev. 715.
Cid, José Manuel Almudí. “Spain: Thin Capitalization Rules in Light of Spanish Double Tax Conventions” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law around the Globe 2012 (Vienna: Linde, 2013) 319 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-around-Globe-2012>
Cockfield, Arthur J & Brian J Arnold. “What Can Trade Teach Tax? Examining Reform Options for Art. 24 (Non-Discrimination) of the OECD Model” (2010) 2:2 World Tax J 139, online: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1645531>
Diebold, Nicolas F. “Standards of Non-Discrimination in International Economic Law” (2011) 60 ICLQ 831.
Dziurdź, Kasper, (editor.) & Marchgraber, Christoph, (editor.) (2015). Non-discrimination in European and tax treaty law : open issues and recent challenges. Vienna LL.m. International Tax Law Wien Linde.
Elliffe, Craig. “Unfinished Business: Domestic Thin Capitalization Rules and the Non-Discrimination Article in the OECD Model” (2013) 67:1 Bull Intl Tax’n 26, online: <http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2216343>
Graetz, Michael J & Alvin C Warren Jr. “Income Tax Discrimination: Still Stuck in the Labyrinth of Impossibility” (2012) 121 Yale LJ 1118, online: <http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=4841&context=fss_papers>
Hammer, Richard M. “Nondiscrimination in the International Tax Context: A Look at OECD Model Article 24” (2005) 12 Tax Mgmt Intl J 700.
Helminen, Marjaana. “Finland: The Permanent Establishment Non-Discrimination Provision and Transfer of Assets” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2013 (Vienna: Linde, 2014) 317 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-Around-Globe-2013>;
Kostic, Svetislav V. “Nationality Non-Discrimination in Serbian Tax Treaty Law” (2014) 3 Annals FLB – Belgrade L Rev 135, online: <http://ojs.ius.bg.ac.rs/index.php/anali/article/view/39/73>
Mason, Ruth. “A Theory of Tax Discrimination” (2008) NYU Jean Monnet Working Paper No 09/06, online: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=978880>
Mason, Ruth & Michael S Knoll. “What is Tax Discrimination?” (2002) 121 Yale LJ 1014, online: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1647014>
Nogueira, João Félix Pinto. “Portugal: PE and Non-Discrimination Regarding Domestic Relief for Double Economic Taxation” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law Around the Globe 2014 (Amsterdam: International Bureau of Fiscal Documentation, 2014) 293 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-Around-Globe-2014>
Organisation for Economic Co-operation and Development. “Application and Interpretation of Article 24 (Non-Discrimination)” (2007) online: <https://www.oecd.org/ctp/treaties/38516170.pdf>
Pistone, Pasquale. “Italy: Domestic Anti-Avoidance Ad Hoc Rules and the Deduction Non-Discrimination Provision in Tax Treatie<s” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2011 (Alphen on the Rhine: Kluwer Law International, 2012)463 <https://www.lindeverlag.at/buch/tax-treaty-case-law-around-the-globe-2011-4419>
Rädler, Albert J. “Most Favoured Nation Concept in Tax Treaties” in Michael Lang et al, eds, Multilateral Tax Treaties: New Developments in International Tax Law (London: Kluwer Law International, 1998) 1 <https://lrus.wolterskluwer.com/store/product/multilateral-tax-treaties/>
Rust, Alexander. “Germany: Cross-Border Group Consolidation” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law around the Globe 2012 (Vienna: Linde, 2013) 357 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-around-Globe-2012>
Sasseville, Jacques. “Canada: Transfer of Losses” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law around the Globe 2012 (Vienna: Linde, 2013) 339 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-around-Globe-2012>
Teixera, Glória. “Tax Systems and Non-Discrimination in the European Union” (2006) 34 Intertax 50.
Traversa, Edoardo & Gaëtan Zeyen. “Belgium: Taking into Account Foreign Income for the Calculation of Personal Tax Deduction” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2013 (Vienna: Linde, 2014) 305 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-Around-Globe-2013>
Vinnitskiy, Danil V. “Russia: Thin Capitalization Rules and Non-Discrimination Clause” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law around the Globe 2012 (Vienna: Linde, 2013) 303 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-around-Globe-2012>
Vinnitskiy, Danil V. “Russia: Thin Capitalization Rules and Non-Discrimination Clause in the Light of the "NaryanmarNefteGaz“ Case” in Michael Lang et al, eds, Tax Treaty Case Law Around the Globe 2013 (Vienna: Linde, 2014) 325 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-Around-Globe-2013>
Vinnitskiy, Danil V. “Russia: Thin Capitalization Rules between Sister Companies under Luxembourg-Russia DTC” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law Around the Globe 2014 (Amsterdam: International Bureau of Fiscal Documentation, 2014) 305 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-Around-Globe-2014>
Wiman, Bertil. “Sweden: Non-Deductibility of Interest Payments” in Eric CCM Kemmeren et al, eds, Tax Treaty Case Law around the Globe 2012 (Vienna: Linde, 2013) 329 <https://www.ibfd.org/IBFD-Products/Tax-Treaty-Case-Law-around-Globe-2012>
Article 24 Cases
Andrea Ready v Commissioner, 2012 WL 310955 (US Tax Ct 2012).
Arbitration Committee, 26 November 2013, No 154/201 (Portugal).
Boake Allen Ltd & Others v Revenue & Customs, [2007] UKHL 25.
British American Tobacco v Commissioner for Taxes, 14 December 1994, 57 SATC 271 (Zimbabwe).
Bundesfinanzhof (Federal Fiscal Court), I B 141/98, 19 April 1999, Bundesfinanzhof/NV, 1999, 1317 (Germany).
Bundesfinanzhof (Federal Fiscal Court), I R 152/94, 22 January 1997, Bundessteuerblatt, 1997, II, 358 (Germany).
Bundesfinanzhof [Federal Tax Court],9 February 2011, I R 54, 55/10, IStR, 345 (Germany).
Bundesfinanzhof (Federal Fiscal Court), V B 123/03, 8 April 2005, Bundessteuerblatt, 2005, II, 585 (Germany).Central Tax Board of Finland, 14 March 2012, No 14/2012 (Finland).
Christine Jeannine Le Tourneau v Commisssioner, 2012 WL 555415 (US Tax Ct 2012).
Commerzban AG v Inland Revenue Commissioners, 31 March 1995, [1991] STC 271 (United Kingdom).
Compaq Computer Corporation and Subsidiaries v Commissioner of Internal Revenue, 28 December
Karl Hofstetter v Commissioner of Internal Revenue, 29 June 1992, 98 TC 695 (United States).
2001, 277 F3d 778 (United States).
Conseil d’Etat (Supreme Administrative Court), 284154-284155-284156-284153, 17 October 2007, Revue de Jurisprudence Fiscale, 2008, 1, 11 (France).
Corte di Cassazione [Supreme Court of Cassation], 23 February 2010, No 4272 (Italy).
Cour Administrative d’Appel Marseille (Administrative Court of Appeal Marseille), 99MA02258, 18 December 2001, Droit Fiscal, 2002, 21, 453 (France).
Cour d’Appel Liege (Court of Appeals Liege), 4 October 2000, 2000-10-04, Journal de Droit Fiscal, 2001, 52 (Belgium).
Cour de Cassation [Court of Cassation], 16 February 2012, No F.10.0115.N/1 (Belgium)
Crawford v MNR(1951), 3 Tax ABC 359.
Croft v Her Majesty the Queen, 17 January 1985, [1985] 1 CTC 2096.
DaimlerChrysler India Private Limited v Deputy Commissioner of Income Tax, (India).
Entergy Corporation & Affiliated Subsidiaries v Commissioner of Internal Revenue, 9 September 2010, TC Memo 2010-197 (United States).
FCE Bank PLC v Revenue & Customs, [2010] UKFTT 136 (TC).
Federal Commercial Court of the North-West District, 18 September 2013, United-Bakers Pskov LLC/Kellogg Group, No A52-4072/2012 (Russia).
Gary Renz v Her Majesty the Queen, 10 July 2002, [2003] 1 CTC 2307.
Glen L Taylor v Her Majesty the Queen, 20 July 2000, 2000 treaty 6451.
Hervert A Filler v Commissioner of Internal Revenue, 27 May 1980, 74 TC 406 (United States).
Hoge Raad der Nederlanden (Supreme Court), 36.207, 2 November 2001,Beslissingen in Belastingzaken, 2001, 426 (Netherlands).
Hoge Raad der Nederlanden (Supreme Court), 42.285, 11 May 2007, Beslissingen in Belastingzaken, 2002, 184 (Netherlands).
Hoge Raad der Nederlanden (The Netherlands Supreme Court), 08/01919, 20 November 2009, Beslissingen in Belastingzaken, 2010, 39 (Netherlands).
Högsta förvaltningsdomstolen [Supreme Administrative Court], 30 November 2011, No 99 (Sweden).
LeTourneau Christina Jeannine v Commissioner of Internal Revenue, 21 February 2012, TC Memo 2012-45 (United States).
Luscher v The Queen, 2012 TCC 151.
NEC Semi-Conductors Ltd v Commissioners of Inland Revenue, [2003] EHC 2813 (Ch).
Nightingale v The Queen, 2010 TCC 1.
Peter M Haver v Commissioner of Internal Revenue, 05-1269, 11 April 2006, 444 F3d 656 (United States).
Phillips Petroleum Co and Affiliated Subsidiaries v Commissioner of Internal Revenue, 9 March 1195, 104 TC 256 (United States).
PPL Corporation and Subsidiaries v Commissioner of Internal Revenue, 20 May 2013, 2013-1 USTC (CCH) 50335 (United States).
Ramada Ontario Ltd v Her Majesty the Queen, 3 December 1993, 94 DTC 1071.
Renz v The Queen, [2003] 1 CTC 2307 (TCC).
Reuters Ltd v New York Tax Appeals Tribunal, 12 October 1993, 603 NYS2d 795 (United States).Revenue & Customs v FCE Bank PLE, [2011] UKUT 420 (TCC).
Saipem UK Limited v Canada, 2011 FCA 243.
Snap-On Tools Inc v United States, 13 August 1992, 26 Fed Cl 1045 (United States).
Specialty Manufacturing Ltd v Her Majesty the Queen,25 August 1997, [1998] 1 CTC 2095
Sportsman v Inland Revenue Commissioners, 23 September 1998, Simon’s Tax Cases, 1998, 289 (United Kingdom).
Square D Company and Subsidiaries v Commissioner of Internal Revenue, 13 Feburary 2006, 438 F3d 739 (United States).
Supreme Commercial Court, 15 November 2011, Severniy Kuzbass v Russian Federation, No 8654/11 (Russia).
Supreme Commericial Court, 21 June 2012, NaryanmarNefteGaz v Russian Federation, No VAS-7104/12 (Russia).
Supreme Court, 31 January 2014, No 12/02201 (Netherlands).
Supreme Court of the Republic of Kazakhstan, ATF Bank JSC v Tax Committee of Almaty City, (Kazakhstan).
Tribunal Economico Administrativo Central (Central Economic-Administrative Court), 2007-03-15, 15 March 2007, Westlaw JT, 2007, 349 (Spain).
Tribunal Fiscal de la Federacion (Federal Tax Court), 12666/98-11_06-3/99-S2-06-02, 7 September 1999 (Mexico).
Tribunal Supremo (Supreme Court), 2598/2010, 25 March 2010, Westlaw RJ, 2010, 2598 (Spain).
Tribunal Supremo [Supreme Court], 17 March 2011 (Spain).
Tribunal Supremo [Supreme Court], 2 November 2011 (Spain).
UBS AG v Revenue & Customs, [2005] UKSPC SPC00480.
UnionBanCal Corpv Commissioner of Internal Revenue, 18 September 2002, 305 F3d 976 (United States).
Verwaltungsgerichtshof (Supreme Administrative Court), 2006/15/0065, 26 July 2007 (Austria).Verwaltungsgerichtshof (Supreme Administrative Court), 92/13/0306, 24 January 1996, Osterrechischen Steuerzeitung, 1997, 13 (Austria).