Non-Discrimination in European and Tax Treaty Law

I. S. 462Introduction: The application of Article 24(3) OECD Model Convention to group consolidation regimes

This study concerns the question whether and under what conditions based on the non-discrimination Article 24(3) of the OECD Model Convention (OECD MC) various group tax consolidation regimes of different countries should also be applied to permanent establishments (PEs) of foreign enterprises. This issue has been unclear ever since the growth of group consolidation regimes and it remains very controversial after recent changes made to the Commentary on Article 24(3) OECD MC.

The basic purpose of Article 24(3) (“the PE provision”) is to ensure that the PE through which an enterprise of one contracting state carries out business in the other contracting state is not taxed less favourably than enterprises of the latter contracting state carrying on the same activities. The PE provision is, however, in many ways difficult to interpret, on the one hand due to its different language compared to other non-discrimination provisions and on the other hand due to the fact that a PE is by definition different from a domestic enterprise to which it should be compared. A specific problem regardi...