IV. Interpretation Issues in
Connection with Arbitration Clauses
International Arbitration in Tax Matters:
The Lead-up to the G20 and UN Meetings
Vienna, October 13, 2015
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Issue
BEPS Action 14 Final Report – some of the 20
countries „would prefer that arbitration should be
limited to an appropriately defined subset of MAP
cases“ (m.no. 63)
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Public Discussion Draft: Option
23
 In order to encourage countries to adopt a MAP
arbitration provision with a limited scope (rather than no
provision at all) the Commentary on Article 25 could be
amended to include such an alternative MAP arbitration
provision, which should also expressly provide for the
possible extension of its scope of application. Limitations
to the scope of MAP arbitration could include, for
example: provision for MAP arbitration only with respect
to cases involving specific treaty articles; provision for
MAP arbitration only in cases of actual double taxation; or
exclusion from the scope of arbitration cases involving the
application of treaty or domestic law anti-abuse rules. An
alternative MAP arbitration provision could also provide
that the competent authorities may mutually agree that
arbitration is not appropriate in a particular case. […]
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Scope of Art 25 par 5 OECD MC
 „not in accordance with“ the treaty
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Art
Art
Art
Art
Art
Art
1 Personal Scope
2 Taxes Covered
6 – 21, 22 Allocation Rules
23 Method Article
24 Non-discrimination Clause
9 Associated Enterprises
 Consequences
 Might lead to double non-taxation
 Not all cases of (juridical) double taxation are covered
(e.g. Art 3 par 2 issues)
 Economic double taxation partly covered (Art 9)
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Limitations of scope for
Art 25 (5) in the OECD MC
1. only cases eligible for the MAP
2. cases pursuant to Art 25 (3) OECD-MC (interpretative +
legislative MAP) are ineligible
3. Only cases where taxation has „actually resulted“
(potential taxation issues ineligible)
4. Only unresolved issues
5. Only cases not yet decided by a court or administrative
tribunal
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Limitations suggested by
BEPS Action 14
 Discussion Draft – several suggestions for limitations were
made (Option 23)
 Only specific treaty articles
 Only cases of „actual double taxation“
 Exclusion of cases involving anti-abuse rules
 Mutual agreement of Competent Authorities that arbitration is not
appropriate on a case-by-case basis
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Limitations of scope in
Art 25 (5) in treaty practice
 Only issues of fact + only issues/provisions agreed upon (DTC
Australia – New Zealand)
 Only: existence of a PE; allocation of profits between an enterprise
and its PE(s) (DTC Switzerland - Canada/France)
 Only TP cases (DTC Japan – Portugal); not available for: attribution
of capital to a PE and other cases agreed upon by the CAs (DTC
Japan – Sweden)
 Except for norm prices under the Norwegian Petroleum Act (DTC
Norway – Netherlands/ UK)
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Possible solutions (I)
 Actual double taxation
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Why?
Minimum level of taxation?
Economic double taxation?
Different taxable events
 Transfer Pricing
 Art 9 and Art 7
 Arbitration Convention (but P.E.)?
 “concerns Art 9 of this Convention, or the existence of a
permanent establishmen, within the meaning of Article 5
…” (France – Switzerland)
 Transfer Pricing as a legal term?
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Possible solutions (II)
 Specific articles
 Allocation rules are linked with each other
 Allocation rules are linked with definitions
 Allocation rules are linked with method article
 Limitation on dispute about facts
 Respecting competence of courts in some countries
 Which facts are relevant?
 Extending or limiting scope of arbitration by
mutual agreement
 Optional
 Difference between extending and limiting
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INSTITUTE FOR AUSTRIAN AND
INTERNATIONAL TAX LAW
Welthandelsplatz 1, 1020 Vienna, Austria
UNIV.PROF. DR. MICHAEL LANG
T +43-1-313 36-DW
F +43-1-313 36-730
michael.lang@wu.ac.at
www.wu.ac.at/taxlaw
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