Non-Discrimination in European and Tax Treaty Law

I. S. 554The Non-Discrimination Rule in Article 24(5) of the OECD Model Convention

A. The Purpose of Article 24(5) – Non-Discrimination in Light of Shareholding

Article 24(5) of the OECD MC has the purpose of preventing tax discrimination among companies of a Contracting State due to foreign ownership. The article establishes that a Contracting State must not treat a company controlled by a resident of the other Contracting State in a different or more burdensome way than a similar company under domestic control:

“Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.”

Through an analysis of its wording, it can be inferred that this paragraph seeks to grant equal conditions to foreign and domestic investors, with regard to the business established through companies in one of the Contracting States. T...