1. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw1 IV. Interpretation Issues in Connection with Arbitration Clauses International Arbitration in Tax Matters: The Lead-up to the G20 and UN Meetings Vienna, October 13, 2015

2. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw2 Issue BEPS Action 14 Final Report – some of the 20 countries „would prefer that arbitration should be limited to an appropriately defined subset of MAP cases“ (m.no. 63)

3. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw3 Public Discussion Draft: Option 23  In order to encourage countries to adopt a MAP arbitration provision with a limited scope (rather than no provision at all) the Commentary on Article 25 could be amended to include such an alternative MAP arbitration provision, which should also expressly provide for the possible extension of its scope of application. Limitations to the scope of MAP arbitration could include, for example: provision for MAP arbitration only with respect to cases involving specific treaty articles; provision for MAP arbitration only in cases of actual double taxation; or exclusion from the scope of arbitration cases involving the application of treaty or domestic law anti-abuse rules. An alternative MAP arbitration provision could also provide that the competent authorities may mutually agree that arbitration is not appropriate in a particular case. […]

4. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw4 Scope of Art 25 par 5 OECD MC  „not in accordance with“ the treaty  Art 1 Personal Scope  Art 2 Taxes Covered  Art 6 – 21, 22 Allocation Rules  Art 23 Method Article  Art 24 Non-discrimination Clause  Art 9 Associated Enterprises  Consequences  Might lead to double non-taxation  Not all cases of (juridical) double taxation are covered (e.g. Art 3 par 2 issues)  Economic double taxation partly covered (Art 9)

5. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw5 Limitations of scope for Art 25 (5) in the OECD MC 1.only cases eligible for the MAP 2.cases pursuant to Art 25 (3) OECD-MC (interpretative + legislative MAP) are ineligible 3.Only cases where taxation has „actually resulted“ (potential taxation issues ineligible) 4.Only unresolved issues 5.Only cases not yet decided by a court or administrative tribunal

6. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw6 Limitations suggested by BEPS Action 14  Discussion Draft – several suggestions for limitations were made (Option 23)  Only specific treaty articles  Only cases of „actual double taxation“  Exclusion of cases involving anti-abuse rules  Mutual agreement of Competent Authorities that arbitration is not appropriate on a case-by-case basis

7. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw7 Limitations of scope in Art 25 (5) in treaty practice  Only issues of fact + only issues/provisions agreed upon (DTC Australia – New Zealand)  Only: existence of a PE; allocation of profits between an enterprise and its PE(s) (DTC Switzerland - Canada/France)  Only TP cases (DTC Japan – Portugal); not available for: attribution of capital to a PE and other cases agreed upon by the CAs (DTC Japan – Sweden)  Except for norm prices under the Norwegian Petroleum Act (DTC Norway – Netherlands/ UK)

8. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw8 Possible solutions (I)  Actual double taxation  Why?  Minimum level of taxation?  Economic double taxation?  Different taxable events  Transfer Pricing  Art 9 and Art 7  Arbitration Convention (but P.E.)?  “concerns Art 9 of this Convention, or the existence of a permanent establishmen, within the meaning of Article 5 …” (France – Switzerland)  Transfer Pricing as a legal term?

9. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw9 Possible solutions (II)  Specific articles  Allocation rules are linked with each other  Allocation rules are linked with definitions  Allocation rules are linked with method article  Limitation on dispute about facts  Respecting competence of courts in some countries  Which facts are relevant?  Extending or limiting scope of arbitration by mutual agreement  Optional  Difference between extending and limiting

10. Institute for Austrian and International Tax Law www.wu.ac.at/taxlaw10 INSTITUTE FOR AUSTRIAN AND INTERNATIONAL TAX LAW Welthandelsplatz 1, 1020 Vienna, Austria UNIV.PROF. DR. MICHAEL LANG T +43-1-313 36-DW F +43-1-313 36-730 michael.lang@wu.ac.at www.wu.ac.at/taxlaw