Triangulation schemes

Triangulation Schemes for dividends, interest and royalties
Art. 24(3)

1) Situation of a PE in the same member State of the payer
 Facts
 ACo distributes dividend/interest/royalty to BCo (attributable to a PE in State A)
 BCo is the beneficial owner of the income (dividend, interest or royalty)
 Situation treated in ph. 62-66 of Commentary on Art. 24




 DTC – tax treaty rules
 Perspective of the Source State (A)
 DTC between A-B applicable (Art. 1 and 4 fulfilled + Art. 2)
 NO limits to impose WHT (ph. 63 on Art. 24), in case of…
 Dividends - Art. 10(4) overrides the WHT limits of Art. 10(2) - ph. 31 on Art. 10
 Interest – Art. 11(4) overrides the WHT limits of Art. 11(2) – ph. 24 on Art. 11
 Royalties – Art. 12(4) overrides the rule of Art. 12(1) – ph. 20 on Art. 12

 Perspective of the Residence State (B)
 Following the throwback rules of Art. 10(4), Art. 11(4), Art. 12(4) – Art. 7 applies!
 Following Art. 7(2) of the DTC between A-B:
 Dividend/interest/royalty shall not be taxed by B (since are attributable to
the PE in State A)
 Income of BCo in the PE State (including the div/int/roy) should be taxable
by A – double taxation?!
 The residence state provides relief under Art. 23A/B

 Application of Art. 24(3)
 WHT shall be creditable against the taxes due by PE in A (if there is a domestic
WHT)
 No credit? Infringement of Art. 24(3)!
 EU Directives
 PSD -> does NOT apply because the PE is not a ‘Parent Company’ under Art. 3
 IRD -> does NOT apply because the scope of Art. 1 is not met