Income from Immovable Property — Preserving the Situs and the Permanent Establishment Principles
(2016) British Tax Review Issue 3
29 Pages Posted: 20 Aug 2016 Last revised: 13 Feb 2017
Date Written: August 9, 2016
It is accepted that tax treaties should allocate primary taxing rights over immovable property and income from immovable property to the situs state; the state in which a taxpayer has a permanent establishment (PE) should have priority over the state of its residence in so far as the taxation of income attributable to that PE is concerned. However, structural inconsistencies within tax treaties prevent these policies from being reconciled, which may enable tax avoidance. In analysing the relevant historical documents, one discovers a previously discarded solution, which allocates primary taxing rights to the situs state, secondary rights to the PE state and tertiary rights to the residence state.
Keywords: Tax treaties, legal history, double taxation, Permanent establishment, Real property, Situs, Tax avoidance
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