×

New to site? Create an Account


Login

Lost password? (close)

Already have an account? Login


Signup

(close)
Our Expert | Our Services | International Tax Course (DTAA) | Contact Us |
Select

Double Taxation Avoidance Agreement – Article 24 Non Discrimination.

|

June 13, 2022 |

14 mins read

Double Taxation Avoidance Agreement – Article 24 Non Discrimination

Article/Para No. OECD Model Tax Convention on Income and on Capital 2017 UN Model Convention 2017
24  Non Discrimination Non Discrimination
In order to provide equality in terms of tax treatment, this Article provides that the tax provision cannot be discriminatory merely because one person is a non-resident.
1 Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.
Comments

UN & OECD Models: Article 24(1) of the OECD Model is identical to Article 24(1) of the UN Model..

International Taxation Course

This paragraph provides that the nationals of the two Contracting States must be treated at par for tax purpose , i.e  tax on non residents must be the same as imposed under the domestic tax law on its own nationals, in same circumstances.

All nationals of a Contracting State are entitled to the benefits of this provision even if they are not residents of either of them but of a third State.

2 Stateless persons who are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of the State concerned in the same circumstances, in particular with respect to residence, are or may be subjected. 2. Stateless persons who are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of the State concerned in the same circumstances, in particular with respect to residence, are or may be subjected.
Stateless persons, who are residents of a Contracting State, can also invoke the non-discrimination provision in OECD/UN Model,

In Indian Treaties, this clause is not available. Indian Treaties deal with ‘Resident of a Contracting State’ irrespective of whether a ‘resident’ is a ‘national’ or ‘stateless’, which implies the non-discrimination clause would apply to all cases.

Paragraph 1 of Article 1 of convention relating to the Status of Stateless Persons, 28th September 1954, defines a stateless person as “a person who is not considered as a ‘national’ by any State under the operations of its law”.

3 The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. 3. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.
This paragraph deals with non-discrimination of a PE of an enterprise of a Residence State shall not be treated ‘less favorably’ in taxation matters by the Source State as compared with an ‘enterprise’ of the Source State.

However, grant of any personal allowance, reliefs and reductions on account of civil status or family responsibilities e.g., marriage allowance, deduction on account of education of children etc. to residents of Source State would not be considered as discrimination (Para 3 of the US Model)

4 Except where the provisions of paragraph 1 of Article 9, paragraph 6 of Article 11, or paragraph 4 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State. 4. Except where the provisions of paragraph 1 of article 9, paragraph 6 of article 11, or paragraph 6 of article 12 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned State.
In certain countries, deduction of interest, royalties and other disbursements are allowed to resident receipients without restrictions but such deduction are restricted or even prohibited to non-residents.

This paragraph provides that no discrimination shall be made in regard to such deduction while determining taxable profits of the resident of the Source State and deduction conditions should be the same.

Countries can apply thin capitalization rules to non residents, provided these are in accordance with relevant paragraphs of Article 9, Article 11 or Article 12, and provided they apply to both residents and non resident.

It also provides that the above requirement would apply equally to debts for the purposes of determining the taxable capital. This part may not be relevant for India as there is no tax on capital (since Wealth-tax is abolished).

International Taxation Course

 
5 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. 5. 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.
Paragraph 5 aims to provide that all resident companies, should be treated equally for tax purpose, whether they are owned and controlled by other resident of that Contracting State,  or whether their capital is owned or controlled, wholly or partly, directly or indirectly, by one or more residents of the other Contracting State.

Distributions (like dividend) to residents and non-residents should be treated in a similar manner, and their should be no tax on dividends, just because the owner of the company are non residents.

6 The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description. 6. The provisions of this article shall, notwithstanding the provisions of article 2, apply to taxes of every kind and description.
This paragraph provides that non-discrimination contained in this Article shall apply to taxes of every kind and description, notwithstanding the definition of ‘taxes’ contained in Article 2.

Learn More about  “Double Taxation Avoidance Agreement – Article 24 Non Discrimination”  – Subscribe International Tax Course

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

LATEST ARTICLES

Deductions under Income Tax available for FY 2022-23

Deductions under Income Tax available for FY 2022-23: With a

Tax Returns and Clarifications under UAE Corporate Tax law

Introduction - Chapter 17 Tax Returns and Clarifications under UAE

Transfer of Tax Loss under UAE Corporate Tax Law

Introduction - Chapter 11- Transfer of Tax Loss under UAE

General Definitions under UAE Corporate Tax Law

Chapter 1: General Definitions under the UAE Corporate Tax Law

Imposition of Corporate Tax and Applicable Rates under UAE Corporate Tax

Introduction - Chapter 2 - Imposition of Corporate Tax and

Taxable Person and Corporate Tax Base under UAE’s Corporate Tax Law

Introduction - Chapter 4 Taxable Person and Corporate Tax Base

Our Services

  • International Taxation

    As an International Tax Consultants, we provide services for FDI, Inbound & Outbound Investment and Transfer Pricing

  • M&A Tax Consultant

    We enhance your corporate value by providing professional advice for M&A, foreign investment and corporate restructuring

  • Income Tax Consultant

    We provide services for Income Tax Return filing, Tax Audit & Transfer Price, Taxation and Compliances, Income Tax Assessment

  • UAE Tax Consultant

    As a UAE Tax Consultants, we provide services for UAE Corporate Tax, UAE Economic Substance regulations (ESR)