Skip to main content

U.S. Treasury Department Proposes Changes to the U.S. Model Income Tax Treaty

This week, the U.S. Treasury Department released five sets of draft revisions to the U.S. Model Income Tax Convention for public comment. The model tax conventions are not binding themselves, but they are very important because they provide the starting point for bilateral tax treaty negotiations between nations. The OECD (Organisation for Economic Cooperation and Development), United Nations, and the U.S. Model tax conventions are three main model tax conventions that are used, with the U.S. model being used by the United States in negotiating tax treaties with other nations. These drafts would make potentially substantial changes to the U.S. model tax convention and subsequently, to future bilateral tax treaties between the U.S. and other countries. Some of the changes to be made by the draft revisions include the following:
  • Discourage the use of corporate inversions to avoid tax by implementing full withholding on payments by "expatriated entities" such as dividends, interest, and royalties.
  • Target abuse stemming from "special tax regimes" that provide low tax rate for movable income such as royalties. The provisions would deny benefits if the "special tax regimes" are used in conjunction with particular provisions of a tax treaty to move such deductible income around.
  • Avoid allowing nonresidents (who reside outside of the two nations who have entered into a bilateral tax treaty) from improperly obtaining benefits  from the treaty.
  • Adds a "derivative benefits" rule to the provisions, that would widen the term "ownership" to include third country ownership.
The draft revisions along with the 2006 U.S. Model Tax Convention and technical explanations are now available on the Treasury Department's website.

Comments

Popular posts from this blog

The Congressional Report on the Executive Authority to Exclude Aliens Released Days Before Immigration Ban

On January 27 President Donald Trump signed an Executive Order, Protecting the Nation from Foreign Terrorist Entry Into the United States. Four days earlier, on January 24, the Congressional Research Service released its own report:  Executive Authority to Exclude Aliens: In Brief.
To those unfamiliar, the Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the Library of Congress, charged with providing the United States Congress non-partisan advice on issues that may come before Congress, including immigration.
Included in the report are in-depth discussions on the operation of sections of the Immigration and Nationality Act (INA) in the context of the executive power . Discussions of sections 212(f),  214(a)(1) and 215(a)(1) report on how the sections have been used by Presidents, along with relevant case law and precedents. Most interesting is the list of executive orders excluding some groups of aliens during past presidencies; the table all…

GAO Launches Government Transition App

Want to learn more about the upcoming presidential and congressional transitions? There’s an app for that. 

The Government Accountability Office (GAO) recently launched its Priorities for Policy Makers app (available free of charge for iPhone or Android), which is intended to “help President-elect Donald Trump and the next Congresstackle critical challenges facing the nation, fix agency-specific problems, and scrutinize government areas with the potential for large savings,” according to Gene Dodaro, Comptroller General of the United States and head of the GAO. The app allows users to search by agency or topic, and provides brief summaries of relevant issues as well as links to more detailed GAO reports. 

You can also find GAO priority recommendations on the agency’s Presidential and Congressional Transition web pages.