Hybrid Entities in Tax Treaty Law

S. 3581. Introduction

Hybrid entities have been one of the major concerns for the world of tax due to their very nature of creating allocation conflicts amongst states. In order to provide a solution to this phenomenon the OECD has been putting forth great efforts for many years. The Application of the OECD Model Tax Convention to Partnerships (so called Partnership Report) by the OECD in 1999 resulted in increased attention on that topic by scholars, tax practitioners and tax administrations around the world. After many years of discussions, the OECD included Article 1(2) to the 2017 version of the OECD Model Tax Convention on Income and on Capital which provides a residence state solution in line with its Partnership Report’s suggestions to address the issue in the OECD MC. However, concerns and discussions seem to be continued for several reasons since some scholars are of the view that the outcomes of Article 1(2) has not been sufficient at all when considering the complexity of the topic.

In this contribution, the author will focus on to the possible impacts of Article 1(2) of the OECD Model Convention to group taxation regimes which requires great attention with the expansion of mult...