Re-visiting the application of the capital ownership non-discrimination provision in tax treaties

Article 24 establishes the principle of non-discrimination in tax treaties. It does not provide, however, for a general rule on non-discrimination. The different paragraphs of article 24 list the circumstances, which, for tax treaty purposes, should not be subject to discriminatory treatment.

The standard non-discrimination article in tax treaties includes a paragraph 5 (also known as the “foreign ownership” or “capital ownership” non-discrimination provision), which prohibits that a domestic enterprise whose capital is wholly or partially owned or controlled directly or indirectly by residents of the other contracting state to be subject to other or more burdensome taxation or connected requirements that a similar enterprise whose capital is owned by residents of the taxing country.

In this contribution I revisit the application and interpretation of article 24(5). For that purpose, I start with an analysis of the requirements that trigger the application of the capital ownership provision. Subsequently, I delve into situations of possible claim of non-discrimination treatment protected by article 24(5). Finally, I explore some other possibilities to apply the capital ownership provision.