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Policy:
Each paragraph1 of article 24 targets a specific type of tax discrimination.2
o In particular, it addresses 2 types of differential treatment:
1) All instances of less favourable treatment of nationals of the other contracting state – (24(1))
2) Some instances of less favourable treatment (directly or indirectly) of residents of the other
contracting state – (24(2)(3)(4)(5))
Important: it ONLY covers DIRECT discrimination
Important: The different paragraphs of article 24 of the OECD Model are based on the idea that there is
discrimination if these tests3 are met:
A. Comparability test4:
1. A taxpayer (the subject of comparison)
2. Being comparable to another taxpayer (the object of comparison)
B. Disadvantage test5:
1. is subject to less favourable tax treatment
PARA 1: Nationality discrimination
Step 1: Nationality
There must be a ‘national of a contracting state’
o ‘National’ -> defined in Art. 3(1)(g)
a. Individuals
b. Artificial companies6
Important: being resident in one of the contracting states is NOT necessary in order to invoke article
24(1) -> it also applies to nationals who are persons who are not residents of one or both of the
contracting states
Step 2: Comparability test7
A. Taxpayers must be ‘in the same circumstances’ (ph. 7)
o Factual circumstances = in all material respects, other than nationality 8
B. Residence as a relevant criterion
o Ph. 8 ‘the underlying question is whether two persons who are residents of the same State are
being treated differently solely by reason of having a different nationality’
o A hypothetical comparison must be made between the taxpayer and a national of the other
contracting state who is “in the same circumstances, in particular with respect to residence”
Comparison:
1) Nationals of contracting state A who are residents of contracting state B
1
Apart from article 24(6), which deals with the scope of application of the provisions as a whole
2
Article 24 in NOT a ‘Most Favoured Nation Clause’ (ph. 2) -> Art.24 does not extend to treaties concluded with third
states
3
Each sub-paragraph has its own comparability test!! -> “in the same circumstances”; “the same activities”; “under
the same conditions”; “similar enterprises” they all apply when all the relevant circumstances are the same except
the protected ground
4
The comparability test implies that article 24 is only applicable if the subject of comparison and the object of
comparison are identical in all relevant aspects
5
The disadvantage test implies that article 24 only applies if the subject of comparison is treated less favourably than
the object of comparison.
6
Nationals of the state which has granted corporate status under its laws
7
See examples phs. 20,21,22
8
Example: the Admin. Court of Nice ruled that Art. 24 applied in a scenario where France exempted the capital gains
on non-resident nationals selling their own house but taxed the capital gain of non-residents having their house in
France discrimination based on nationality -> prohibited!!
, -a national of state A who is resident in state B should be compared to a national of
state B who is also resident in state B
2) Nationals of contracting state A who are non-residents of contracting state B
- Comparison to a national of state B who is also non-resident in state B
C. Exception: irrelevance of residents9
o Residents and non-residents can still be in the same situation in situations where residence has no
relevance whatsoever with respect to the different treatment (ph. 18)
Step 3: Discrimination test10
Article 24(1) prohibits “other or more burdensome”11 tax treatment of non-nationals
o Shall not be subjected in the other Contracting State
the taxpayer should be accorded national treatment
the criteria “other taxation” and “more burdensome taxation” are alternatives.
o it is sufficient that the taxation of a non-national occurs on a legal basis different from that used
for the taxation of nationals.
PARA. 2: Stateless persons
“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.”
SEE ARTICLE + COMMENTARIES
9
See example 23
10
Non-nationals can be treated better (ph. 14)
11
“other taxation” -> refers to the situation where a non-national is subject to a different tax entirely
“more burdensome taxation” -> refers to the situation where a non-national is subject to the same tax as a
national but where this tax is levied in a more burdensome manner
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