Access to Treaty Benefits

S. 2841. Introduction

Taxes on capital are covered by Article 2 of the OECD Model, which defines the substantive scope and, therefore, is a foundational aspect of double taxation conventions (“DTCs”). Despite its fundamental relevance for treaty access, not much attention was given to the term in the past.

One reason might be that taxes on capital have declined significantly in most countries in the past decades. While taxes on capital, specifically on property, were the main taxes imposed in the beginning of the 19th century, they nowadays represent a relatively small share of the total tax receipts among countries. In most countries, wealth taxes have been abolished and only a minority still imposes them, for instance Luxembourg, Norway, Spain and Switzerland. As a logical consequence of this decline, the risk of juridical and economical double taxation is considerably lower compared to taxes on income.

Another reason for the lack of coverage might be the high level of complexity with regard to the notion of capital. The universal ground of legal and economic theories on capital is the English common law view, which regards capital as res, a thing. Capital, however, is a broad term for wh...