Taxation of Interest under Domestic Law : : EU Law and Tax Treaties.

• Superior document: EC and International Tax Law Series ; v.19
• Author: et, Autilia Arfwidsson.
• Place / Publishing House: Amsterdam : : IBFD Publications USA, Incorporated,, 2022.; Ã2022.
• Year of Publication: 2022
• Edition: 1st ed.
• Language: English
• Series: EC and International Tax Law Series
• Physical Description: 1 online resource (1085 pages)

This book comprises the proceedings and working documents of the EC & International Tax Law seminar held in Milan in November 2021.

Table of Contents

Cover -- Title -- Copyright -- Acknowledgements -- Foreword -- Part One: Introduction - Definition of Interest and Policy Perspectives -- Chapter 1: Definition of Interest in the Context of Income from Capital: A Comparative Analysis -- 1.1. Introduction -- 1.2. What is interest? -- 1.3. Obligation to pay -- 1.4. Substance vs form -- 1.5. Statutory definitions of interest -- Chapter 2: A Tax Policy Analysis of the Inclusion of Cross-Border Interest in Income -- 2.1. Introduction -- 2.2. Major issues with respect to the taxation of cross-border interest income -- 2.2.1. The meaning of "interest" -- 2.2.2. Characterization issues -- 2.2.2.1. Introduction -- 2.2.2.2. Hybrid financial instruments -- 2.2.3. Timing of the inclusion in income of cross-border interest -- 2.2.3.1. Sale of rights to interest -- 2.2.3.2. Sale of obligations with accrued interest -- 2.2.4. Cross-border interest derived from non-arm's length parties -- 2.2.4.1. Introduction -- 2.2.4.2. Transfer pricing -- 2.2.4.3. Other issues with respect to interest income derived from non-arm's length parties: Intercompany loans -- 2.2.4.3.1. Intercompany interest-free or low-interest loans -- 2.2.4.3.1.1. Intercompany loan by a subsidiary to its non-resident parent corporation -- 2.2.4.3.1.2. Intercompany loan by a parent to its subsidiary corporation -- 2.2.4.3.2. Intercompany loans with excessive interest -- 2.2.4.3.2.1. Intercompany loan by a subsidiary to its parent corporation -- 2.2.4.3.2.2. Intercompany loan by a parent to its subsidiary corporation -- 2.3. The taxation of cross-border interest derived by residents -- 2.3.1. Introduction -- 2.3.2. Source rules -- 2.3.2.1. Interest derived by residents from non-residents -- 2.3.2.2. Interest derived by non-residents from residents -- 2.3.3. The elimination of double taxation -- 2.3.4. CFC rules.

2.4. The taxation of non-residents on cross-border interest income -- 2.4.1. Introduction -- 2.4.2. Taxation of interest income derived by non-residents in the course of a non-resident's business carried on in another country -- 2.4.3. Taxation of non-business interest income derived by non-residents -- 2.4.3.1. Introduction -- 2.4.3.2. Issues in designing withholding taxes on cross-border interest -- 2.4.3.2.1. Introduction -- 2.4.3.2.2. Payments subject to withholding tax -- 2.4.3.2.3. Payers of interest subject to an obligation to withhold -- 2.4.3.2.4. Withholding tax rates -- 2.4.3.2.5. Exemptions from withholding tax -- 2.4.3.2.6. Anti-avoidance rules -- Part Two: EU Law -- Chapter 3: Open Issues in the Application of the EU Interest-Royalties Directive -- 3.1. Introduction and overview -- 3.2. Current issues in the application of the EU Interest-Royalties Directive -- 3.2.1. Autonomous interpretation of Union law and OECD guidance -- 3.2.2. The concept of "beneficial ownership" in the Interest-Royalties Directive -- 3.2.3. "Subject-to-tax" and the definition of a "company of a Member State" -- 3.2.4. Hybrid financing: "Interest", "distribution of profits", or neither? -- 3.3. Outlook: EU tax policy and the Interest-Royalties Directive -- Part Three: Tax Treaties -- Chapter 4: The Historical Evolution of Article 11 OECD Model Convention -- 4.1. Introduction -- 4.2. The work of the League of Nations -- 4.2.1. The four economists' report (1923) -- 4.2.2. The work of the technical experts (1922-1925) and the 1927-1928 models -- 4.2.3. The Mexico (1943) and London (1946) models -- 4.3. The work of the OEEC -- 4.4. The 1977 changes made to article 11 -- 4.5. Changes made to article 11 after 1977 -- 4.6. Conclusion -- Chapter 5: Definition of Interest under Article 11 of the OECD Model Convention and Possible Overlap with Other Distributive Rules.

5.1. Overview -- 5.2. Background to the definition -- 5.3. Items included in the definition of interest -- 5.4. Items excluded from the definition of interest -- 5.5. Interaction with article 10 -- 5.6. Interaction with article 6 -- 5.7. Interaction with article 7 -- 5.8. Interaction with article 9 -- 5.9. Interaction with article 13 -- Chapter 6: Double Source -- 6.1. Introduction -- 6.2. Evolution of article 11(5) -- 6.3. Commentary on Article 11(5) -- 6.4. To what extent is article 11(5) adopted in tax treaties? -- 6.5. Domestic law approaches to source -- 6.5.1. The League of Nations - No settled approach to the source of interest -- 6.5.2. Interactions between the development of source doctrine in Australia, Hong Kong, New Zealand, South Africa and the United Kingdom -- 6.5.3. South Africa -- 6.5.4. Australia -- 6.5.5. Hong Kong (Malaysia, Qatar and Singapore, etc.) -- 6.5.6. New Zealand -- 6.5.7. Other jurisdictions considered in the Country Reports -- 6.6. Themes -- Chapter 7: Departures from Article 11 of the OECD Model Convention -- 7.1. Introduction -- 7.2. Allocation of taxing rights between residence state and source state -- 7.3. Article 11(1) OECD Model: Departures in tax treaty practice -- 7.4. Article 11(2) OECD Model: Departures in the allocation of taxing rights to the source state -- 7.4.1. Introduction and scope of paragraph 2 -- 7.4.2. Source tax limitation: Reservations and positions expressed by OECD member countries and non-OECD member countries -- 7.4.3. Use of the alternative provisions of the OECD and UN Models -- 7.4.4. Other departures found in treaties and the most favoured-nation clauses -- 7.5. Article 11(3) OECD Model: Inconsistent definitions of interest in treaty practice -- 7.5.1. Introduction and countries' reservations -- 7.5.2. Reference to domestic law -- 7.5.3. Relationship with other distributive rules.

7.5.4. Specific inclusions and exclusions -- 7.5.5. Penalty charges -- 7.6. Article 11(4) OECD Model: The PE throwback rule in actual treaties and other deviating provisions dealing with PEs -- 7.6.1. Introduction and frequent minor deviations -- 7.6.2. Limited force of attraction and PE exception rule -- 7.6.3. Interest paid to PEs in a third state -- 7.7. Article 11(5) OECD Model: Deviations concerning the source of interest -- 7.7.1. Introduction and more common deviations -- 7.7.2. Concepts of "resident" and "borne by" in article 11 -- 7.7.3. More radical departures: Different or additional sourcing nexuses and branch level interest tax -- 7.8. Article 11(6) OECD Model: Different country practices with respect to non-arm's length interest -- Chapter 8: Interest and Non-Discrimination under the OECD Model Convention -- 8.1. Introduction -- 8.2. The meaning of "interest" in article 24 OECD Model Convention -- 8.2.1. Defining "interest" for purposes of article 24 OECD Model Convention -- 8.2.1.1. Lack of treaty definition -- 8.2.1.2. Autonomous or nationally derived definition -- 8.2.1.3. The lack of importance of a sharp definition -- 8.2.2. Borderline cases -- 8.2.2.1. Notional interest payments -- 8.2.2.2. Penalty interest -- 8.2.2.3. Interest recharacterized as dividend -- 8.3. Discrimination of interest under article 24(4) OECD Model Convention -- 8.3.1. The core of the rule -- 8.3.2. Comparability analysis under article 24(4) OECD Model Convention -- 8.3.3. Relationship to article 9(1) and 11(6) OECD Model Convention -- 8.3.4. Interest payments to shareholders and the relationship between article 24(4) and (5) -- 8.3.5. A special case: Interest deduction limitations -- 8.4. Discrimination of interest payments under article 24(3) OECD Model Convention -- 8.4.1. The core of the rule.

8.4.2. Relationship between article 24(4) and 24(3) OECD Model Convention -- 8.4.3. Deductibility discrimination falling under article 24(3) OECD Model Convention -- 8.4.4. Other discrimination falling under article 24(3) OECD Model Convention -- 8.5. Conclusion -- Chapter 9: Conduit Companies Involving Interest Payments under Double Taxation Conventions: A Beneficial Ownership or a Principal Purpose Test Problem? -- 9.1. Introduction, opening considerations and scope of the discussion -- 9.2. Blurring between beneficial ownership and abuse in the pre-BEPS era - Selected considerations Indofood -- 9.2.1. The UK case and HMRC's guidance -- 9.2.1.1. Facts and findings in Indofood -- 9.2.1.2. UK HMRC's guidance -- 9.2.2. The conduit arrangement clause model -- 9.3. The post-BEPS era: The continuing tension between beneficial ownership and the PPT -- 9.3.1. The approach to conduit companies under the PPT and the 2001 UK-US DTC exchanges of notes as inspirational source -- 9.3.2. The problem of the articulation between beneficial ownership and the PPT -- 9.3.2.1. The easy question: The order of application -- 9.3.2.2. The more difficult question: Restrictive or broad meaning of beneficial ownership? -- 9.3.2.2.1. Arguments in favour of a restrictive meaning of beneficial ownership -- 9.3.2.2.2. Arguments in favour of a broad meaning of beneficial ownership -- 9.3.2.3. Can a broad meaning of beneficial ownership "neutralize" the PPT policy? -- 9.4. Conclusions and proposed solutions -- Part Four: National Reports -- Chapter 10: Australia -- 10.1. General law meaning of "interest" and definition of terms used by article 11(3) of the OECD Model Convention -- 10.1.1. The meaning of "interest" under general law -- 10.1.2. The meaning of the terms included in the treaty definition of "interest" under general law -- 10.1.2.1. Debenture -- 10.1.2.2. Bond.

10.1.2.3. Securities and Government Securities.