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Finance & Accounting
Pages 5 (1255 words)
Name Course Instructor Date Double Taxation: US, UN and OECD Models – Permanent Establishment and Business Profits 1.0 Introduction In an article entitles ‘Double Tax Treaties: The Basics and Benefits’ (Zarb: 50) indicates that as a result of globalization the issue relating to double taxation has been brought into the limelight.
However, attempts to deal with the problem of double taxation goes back to the early 1920’s. Although the US has not adopted the OECD model treaty, the model has played a great role in the treaties that the US has entered into since 1963. In fact the Technical Explanation US Model Convention points to the OECD model in explaining permanent residence (US: 2006). The OECD Model Tax Convention contains the treaty concept of permanent establishment which is used mainly to determine taxation rights when a business entity in one country derives profits from a business in another country (OECD: 2012). Double taxation treaties are bilateral agreements between countries and serves to: facilitate a reduction in or an elimination of the problem of double taxation of income; establish cooperation between authorities in contracting states on tax matters; facilitates the promotion of trade between contracting countries so that normal flow of capital is not negatively affected; divides revenue in a fair manner; and fights against tax evasion and fraud (Zarb: 51). ...
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