The 'OECD Saving Clause': An American-Tailored Provision Made to Measure the World

Rivista di Diritto Finanziario e Scienza delle Finanze, LXXVIII 1, I, 13-52 (2019)

41 Pages Posted: 18 Jul 2019

See all articles by Leopoldo Parada

Leopoldo Parada

University of Leeds School of Law

Date Written: July 1, 2019

Abstract

This article argues that the “saving clause” provision introduced in the 2017 OECD Model conflicts with the entitlement to double taxation relief under Article 23 OECD Model, especially in cases involving the use of hybrid entities. Although this issue is pragmatically solved in the new paragraph 11.1 of the commentaries on Articles 23A and 23B OECD Model, which provides no obligation for the Contracting States to relieve double taxation to the extent that taxation is based exclusively on the residence of the taxpayer, it leaves the taxpayer in the residence state with a potential permanent double taxation status. The foregoing may be however avoided with an optional “reverse saving clause”. Such an option seems to be not only more coherent with the traditional object and purpose of tax treaties (double taxation relief), but it also reflects the tax treaty practice already in force in some countries around the world.

Keywords: saving clause; double taxation; hybrid entities; reverse saving clause

JEL Classification: K34

Suggested Citation

Parada, Leopoldo, The 'OECD Saving Clause': An American-Tailored Provision Made to Measure the World (July 1, 2019). Rivista di Diritto Finanziario e Scienza delle Finanze, LXXVIII 1, I, 13-52 (2019), Available at SSRN: https://ssrn.com/abstract=3417841

Leopoldo Parada (Contact Author)

University of Leeds School of Law ( email )

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