Volume 39 (2011) / Issue 4

Arnaud de Graaf, Frank Pötgens, 'Worrying Interpretation of ‘Liable to Tax’: OECD Clarification Would Be Welcome' (2011) 39 Intertax, Issue 4, pp. 169–177


This article examines the rather strict interpretation of 'liable to tax' by the Dutch and Canadian Supreme Court requiring persons to be effectively liable in order to be treated as a treaty resident. As outlined, such an interpretation has the consequence of preventing tax-exempt bodies from being able to claim treaty benefits while also resulting, under certain allocation rules, in source states being unable to exercise their taxing rights. In the view of the authors, a person should be regarded as a treaty resident if he has such a nexus with a state that he would normally be taxed on his worldwide income there. Whether he actually pays tax is irrelevant, which is the view of many. For resolving the issue, the authors outline a proposal.

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ISSN: 0165-2826
ID: TAXI2011020