Access to Treaty Benefits

S. 2641. Introduction

The personal scope of the Convention, incorporated in Article 1 of the OECD MC, is complemented by Article 2 which determines the taxes that will be covered, i.e. the taxes on income and capital described in Article 2(2) and illustrated in Article 2(3). These taxes have to be imposed on the behalf of either a contracting state or its political subdivision or local authorities, irrespective of the manner in which they are levied.

It is important to note that if a tax does not fall within the ambit of Article 2, the allocations rules and method articles would not apply. In this case, the two states could subject the income to taxation. Therefore, such an article is of great importance to avoid cases of double taxation, as it permits applying the method articles thus giving a relief to the taxpayer.

Furthermore, in determining the substantive scope of the Convention, Article 2 becomes a key element in establishing whether or not a taxpayer has access to the treaty benefits of a DTT.

As stated by the Commentaries, Article 2 is drafted in a way as “to widen as much as possible the field of application of the Convention … to avoid the necessity of concluding a new convention ...