Tax Treaty Case Law around the Globe 2016

S. 367Chapter 31 United States: The Starr Int’l Case

Yariv Brauner

31.1. Introduction

This case addresses whether judicial review is available where the US competent authority (USCA) denies discretionary treaty benefits to a taxpayer. This is a memorandum opinion that addresses only this initial issue of whether the contested decision of the USCA is subject to judicial review and therefore whether the court can hear it at all.

31.2. Facts of the case

In the 1970s, Starr International (Starr), a Bermuda corporation, became the largest shareholder of AIG. Subsequently, Starr received dividends on the AIG stock that were subject to a 30 % withholding tax in the United States. In 2004, Starr moved its residence from Bermuda to Ireland to take advantage of the tax treaty between Ireland and the United States, reducing the withholding rate on dividends by half (from 30 % to 15 %). In the following year, Starr moved residence from Ireland to Switzerland. Starr claimed that this move was to protect itself from an AIG lawsuit, alleging Starr was obligated to fund AIG’s executive compensation plans. This related to the earlier transfer of business from Starr to AIG. In any event, such a lawsuit had ind...