Course Number: LAW 569B.001 Title: Subtitle: Topics in International Taxation Tax Treaties Credits: 2 Style: Seminar Dates: May 16 27, 2016 Instructor Name: Email: Professor Jonathan Schwarz jonathan.schwarz@taxbarristers.com Instructor Bio: Jonathan Schwarz BA, LLB (Witwatersrand), LLM (UC Berkeley), FTII is an English Barrister at Temple Tax Chambers in London, a South African Advocate and an Alberta Barrister and solicitor. His practice focuses on international tax disputes as counsel and as an expert and advises on solving cross border tax problems. He is a visiting professor at the Dickson Poon School of Law, King s College London where he leads the LLM(International Tax Law) programme. He also teaches regularly at the International Tax Centre, Leiden University where he is on the advisory board for the AdvLLM (Transfer Pricing) and at the University of Zurich. Publications include Schwarz on Tax Treaties 4th Ed and Booth and Schwarz: Residence, Domicile and UK Taxation 18th Ed He is a former First Vice President of the International Fiscal Association, former Vice Chairman: Committee (N) Taxes, International Bar Association and has been listed as a leading tax Barrister in both the Legal 500 by reference to recommendation for international corporate tax, and Chambers' Guide to the Legal Profession by reference to international transactions and particular expertise in transfer pricing. The Legal 500 has commented that Jonathan Schwarz is a client favourite, particularly for international transactions. In the Chambers Guide he is commended for his encyclopaedic knowledge of double tax treaties He was appointed to the EU Commission Group of experts on removing tax problems facing individuals who are active across borders within the EU in June 2014. Course Description:
*This intensive seminar will meet in [Allard Rm xx] May 16 27, 2016; M F, 10:00 a.m. 12:30 p.m. To make up for the school closure on Monday, May 23, there will be an afternoon session added to Tuesday, May 24, from 2:00 p.m. 4:30 p.m. Priority registration to LLM students. Open to JD students if space available. Time conflicts are allowed for this seminar.* Tax treaties are the major international coordination mechanism between different countries income tax systems. This course provides an international and comparative view of tax treaties in the context of increasing globalization of world economies. Through examination of key issues involving the OECD and UN Model Tax Conventions on which comprehensive tax treaties are based, you will gain an understanding, of the large body of shared experience in the interpretation and application of tax treaties as well as the role that international organizations play in the development of international taxation and of tax treaty policies including the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, the UN and EU. Prerequisites: [Law 220, Law 407 or Law 561.] Evaluation: One short written assignments (maximum 1000 words) worth 10% and a take home exam worth 90%. The take home exam will involve a mix of short problems and essays (3500 words maximum). Syllabus: Seminar Interpretation of tax treaties The aim of this seminar is to gain an international perspective on understanding what tax treaties mean. Does every country interpret treaties in the same way? In this seminar we compare decisions of senior courts in several countries to see how they approach basic principles of interpretation, sources of law, the role of experts and other factors. Anson v HMRC [2015] UKSC 44, at [54] to [59], [92] to [100] and [110] to [110]. http://www.bailii.org/uk/cases/uksc/2015/44.html Krok v CSARS [2015] ZASCA 107, at [22] to [41] http://www.saflii.org/cgibin/disp.pl?file=za/cases/zasca/2015/107.html&query=krok National Westminster Bank Plc v United States, Court of Appeals, Federal Circuit; 2007 5028, 15 January 2008, 512 F3d 1347 Crown Forest Industries Ltd. v Canada, [1995] 2 SCR 802
Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapter 1, paras 9 050, 9 100, 9 150, 9 300 and 9 350; Chapter 4. Schwarz, J, Tax Treaty Interpretation after Ben Nevis (Holdings) Ltd v. Her Majesty s Revenue and Customs Bulletin for International Taxation [2014] Vol 67 No 1 p 20. Macklin v HMRC [2015] UKUT 39 (TCC) especially at [18] and [37] http://www.bailii.org/uk/cases/ukut/tcc/2015/39.html Prevost Car Inc. v. The Queen, [2008] 5 CTC 2306; [2008] DTC 3080 2008 TCC 231(CanLII), at [41], [53] to [54]. Knights of Columbus v. The Queen, [2009] 1 CTC 2163 2008 TCC 307 (CanLII), at [30] to [35]. VCLT articles 31 to 33 OECD Model, Article 3 OECD Model, Article 1 and 3(1)(a) and (b); Treaties and EU law The aim of this seminar is to develop an understanding of the relationship between tax treaties and the fundamental freedoms in EU law and between tax treaties and EU tax directives. Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapters 3 and 14. BEPS and treaties The aim of this seminar is to gain an understanding of (a) the role played by tax treaties in the way multinational enterprises have organised themselves and (b) the effect that the OECD BEPS project will have on the shape of tax treaties and their interpretation. Students should try to read the executive summaries for each of the actions. Existing tax strategies are discussed in Final Report on Action 1 Chapter 5 and Annex B. Final reports on the treaty related actions are set out below and are for reference.
OECD (2015), Addressing the Tax Challenges of the Digital Economy, Action 1 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264241046 en OECD (2015), Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264241138 en OECD (2015), Preventing the Granting of Treaty Benefits in Inappropriate Circumstances, Action 6 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264241695 en OECD (2015), Preventing the Artificial Avoidance of Permanent Establishment Status, Action 7 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264241220 en OECD (2015), Making Dispute Resolution Mechanisms More Effective, Action 14 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264241633 en OECD (2015), Developing a Multilateral Instrument to Modify Bilateral Tax Treaties, Action 15 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264241688 en Non discrimination The aim of this seminar is to gain an understanding of (a) the meaning of discrimination in model tax treaties, (b) its application to cross border taxation and (c) most favoured nation treatment in tax treaties. Required reading Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapter 16. Friedlander, L, The role of non discrimination clauses in bilateral income tax treaties after GATT 1994 British Tax Review 2002, 2, 71 118 OECD Model Tax Convention Article 24 OECD Model Articles 3(1)(g), 7, 9(1), 11(6) and 12(4) Canada US Art 25; Canada South Africa Treaty Article 23 Harmful Tax Practices
The aim of this seminar will be to examine the concept of harmful tax practices, the OECD work in relation to them and the legal instruments that aim to address such practices including the OECD BEPS Action 5 and EU state aid investigations. Required reading Schwarz, J EU State Aid investigation into Apple, Starbucks and Fiat, Tax Journal, 20 June 2014 OECD/G20 Base Erosion and Profit Shifting Project Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance Action 5: Final Report, 6 October 2015 http://dx.doi.org/10.1787/9789264241190 en Executive summary Reading on Commission investigations Ireland Apple Investigation State aid SA.38373 Letter to Ireland informing decision to investigate C(2014) 3606 final 11.06.2014 Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union (2014/C 369/04) JOCE 17.10.2014 The Netherlands Starbucks State aid SA.38374 Letter to the Netherlands informing decision to investigate C(2014) 3626 final 11.06.2014 Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union(2014/C 460/03) JOCE 19.12.2014 Luxembourg Fiat Finance State aid SA. 38375 Letter to Luxembourg informing decision to investigate C(2014) 3627 final11.06.2014 Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union (2014/C 369/05) JOCE 17.10.2014 Luxembourg Amazon State aid SA.38944 Letter to Luxembourg informing decision to investigate C(2014)7156 final15.01.2015 JOCE 06.02.2015 CASE STUDIES Fact patterns and legal questions will be handed out in advance of each class. You should come prepared to discuss your answer at the seminar. Entity characterisation The aim of this case study is to consider how foreign entities are characterised for tax treaty purposes.
OECD Model, Article 1 and 3(1)(a) and (b); Commentary to Article 1, paras 2 to 6.7; Commentary to Article 23, paras 32.1 to 32.7. TD Securities (USA) LLC v The Queen, 2010 TCC 186 (CanLII) Anson v HMRC [2015] UKUT 44 Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapter 6 para 14 050. Clayson, M, OECD Partnerships report: reshaping treaty interpretation? British Tax Review 2000, 2, 71 83 Avery Jones, JF et al, Characterisation of other states' partnerships for income tax, British Tax Review 2002, 5, 375 436. Boidman, N and Kandev, M, Foreign Entity Classification and the meaning of Corporation / Societe in the Income Tax Act, Canadian Tax Journal (2009) Vol 57, No 4. 880 904. CTJ (2010) Vol 58, No 3, 646 Place of effective management The aim of this case study is to consider the interpretation and application of art 4(3) of the OECD Model and variants of it in a common corporate context. OECD Model, Article 4(1) and 4(3); Canada UK Treaty Article 4(3) Commentary to OECD Model Article 4, paragraphs 21 to 24.1. Trevor Smallwood Trust v Revenue & Customs [2008] UKSPC SPC00669 (19 February 2008) [108] to [130] http://www.bailii.org/uk/cases/ukspc/2008/spc00669.html Arnold, B, A Tax Policy Perspective on Corporate Residence 51 Canadian Tax Journal (2003) 1559 Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapter 6 para 14 200. Cross border employment The aim of this case study is to analyse the treaty implications for employees who are sent overseas by their employers to work under a variety of contractual arrangements.
OECD Model Tax Convention, Article 15 OECD Commentary on Article 15 Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chaprter 7, para 15 500, Chapter 11 para 19 300. Permanent Establishments and business restructuring The aim of this case study is to examine the impact on the existence of, and the attribution of profits to, a permanent establishment in the light of modern manufacturing and distribution strategies (smartphone manufacture and distribution). OECD Model Tax Convention, Articles 5 and 7. Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapter 7 paras 15 400, 15 600. Kluwer International Tax Blog http://bit.ly/1dm2hcz 16 December 2015 Agency Permanent Establishments: Commissionaires in the frame Treaty characterisation of income The aim of this case study is to (a) introduce key differences between the OECD and UN Model treaties and (b) to analyse the application of tax treaties based on the UN Model in a common commercial transaction (satellite operation). OECD Model Tax Convention, Articles 5, 7 and 12(2). UN Model Tax Convention, Articles 5, 7 and 12(3) Canada Vietnam Treaty, (1997) Article 12. Schwarz, J, Schwarz on Tax Treaties, (4th ed) (CCH 2015), Chapter 9 para 17 550. UN Committee of Experts on International Cooperation in Tax Matters: Follow Up Note on Taxation of Fees for Technical Services, 3 October 2012