Access to Treaty Benefits

S. 1921. Introduction

When a taxpayer establishes personal or economic interests in more than one jurisdiction, it is likely to be considered as domiciled in more than one jurisdiction, according to the domestic law of each State. Without a tie-breaker rule, this would sometimes lead to double non-taxation, and often to double taxation, both of the jurisdictions considering that they can impose a full tax liability on the taxpayer.

Historically, the double tax treaties have not always included a tie-breaker rule. For example, the model convention drafted by the League of Nations in 1928 dealt with double residence by stating that the individuals shall be imposed in each of the States in proportion to the period of stay during the fiscal year, or according to a division to be determined by agreement between the competent administration. In the Mexico Draft Model Bilateral Convention for the Prevention of the Double Taxation of Income and in the London draft, a first tie-breaker rule was included, but it required the common agreement of the tax authorities and did not provide for a series of tests.

The first real tie-breaker rule can be found in the second report of the OEEC Working Group on ...