Treaty Avoidance of Double Taxation of Passive Income: Developing countries - UN Model
Promovendus: Dhr. G.J. Garfias von Fürstenberg
Promotor: Prof.Dr. R.G. Prokisch
Duur: 1/4/2012 - 31/3/2015
The United Nations Model Tax Convention, hereinafter UN Model, is aimed to be the guide for developing countries on the negotiation and conclusion of Double Tax Conventions with developed countries. For developing countries the import of capital is one of the major factors of influence in their gross national product and, in general, the majority of the foreign investment comes from developed countries. Just as an example, in Chile the 95% of the foreign investment came from OECD countries. The above demonstrate the importance for developing countries from a Tax Policy perspective the treatment of cross-border profits generates as a consequence of these investments. The source country right to tax, and therefore, the relevance of conclude treaties that reinforce the source country right to tax, as in theory the UN Model does, became an essential policy for developing countries. Passive income is generally associated with residence country right to tax, and the treatment of theses types of incomes in the UN Model demonstrates the above. Therefore, this research aims to return to the origins of the treatment of passive income on double tax conventions, understand the underlying reasons for treat passive income in the way that is nowadays treated, and accordingly, be able to comprehend why the United Nations almost fully follow the OECD Model approach aimed for developed countries relations on the treatment of passive income. Hence, and due to the lack of research on the field, this research aim to review the passive income treatment in the UN Model as a whole, make an historical approach, a detailed article per article analysis where the differences and the similarities with the OECD Model will be analysed. Finally, if the research demonstrates failures in the treatment of passive income in the UN Model, the author will try to propose adequate changes to the articles actually in force.