Tax Treaty Case Law around the Globe 2023

1. Introduction

The decision of the Court of Appeal of Ghent dated 29 March 2022 (n°2021/AR/46) concerns the interpretation and application of the residence tie-breaker rule of Article 4 (in this case, § 3) of the Belgian-Hong Kong DTC of 10 December 2003 (called “Agreement between the Kingdom of Belgium and the Hong Kong Special Administrative Region of the People’s Republic of China”).

As a quick reminder, the tie-breaker rule is a treaty provision that is used in case a taxpayer – individual or legal person – is considered a resident by both contracting states (so-called dual residence situation).

In this regard and considering the aims, the structure (distributive rules), and the application of an international tax treaty (DTC), it is essential that a person is regarded as a resident of only one contracting state in order to avoid double taxation issues (as a rule, if one of the contracting states is regarded as the state of residence, the other contracting state, in principle, loses its taxing power).

Conversely, from the taxpayer’s point of view, it can be of great interest and advantage to be regarded as a resident of the contracting state in which the tax burdens are low(er). T...