Preventing Treaty Abuse

I. S. 108Introduction

The basic requirement for treaty entitlement is being a ‘resident’ of one or more contracting states. However, a question which comes up here is how situations involving dual residents are dealt with. Is there a simple and a direct solution to deal with such cases? Article 4 of the Organisation for Economic and Development (‘OECD’) Model Convention deals with the term ‘resident’. There are various controversies in respect of the aforementioned term. This contribution deals with a few of such controversies. The contribution has been divided into three areas 1. Article 4(1) – Concept of “liable to tax”, 2. Tie breaker rules and 3. Dual resident triangular cases. It may be noted that the issues surrounding the first two areas are important to understand the third area, i.e. the core topic here ‘Dual resident triangular cases’. The research has been done mainly keeping in mind the OECD Model Convention. However, aspects of the UN Model and US Model have been highlighted, wherever necessary.

Article 4(1) of the OECD Model Convention refers to resident of a contracting state as ‘any person who under the laws of that State, is liable to tax by virtue of domicile, residence, ...