Andrew Mitchel LLC

International Tax Blog - New and Interesting International Tax Issues

New IRS Practice Units published in March


Tags: 894 Competent Authority, 894 Treaties, Other - IRS Practice Units

Canada & U.S. to Apply the Authorized OECD Approach (“AOA”) for Attribution of Business Profits


In the recently released Announcement 2012-31, the IRS announced that the competent authorities of the U.S. and Canada entered into an agreement regarding the application of Article VII (Business Profits) of the Canada-U.S. Income Tax Treaty (the “Treaty”).

Paragraph 9 of Annex B of the Treaty refers to the applicability of the OECD Transfer Pricing Guidelines, by analogy, for the purposes of determining the business profits attributable to a permanent establishment.

The OECD Report on the Attribution of Profits to Permanent Establishments (the “Report”) was finalized in 2008 and revised in 2010 without change to the conclusions of the Report (the “authorized OECD approach” (“full AOA”)).

The competent authorities agreed that Article VII of the Treaty is to be interpreted in a manner entirely consistent with the full AOA. All other provisions of the Treaty that require a determination of whether an asset or amount is effectively connected or attributable to a permanent establishment are also to be interpreted in a manner entirely consistent with the full AOA.

The agreement generally applies to taxable years that begin on or after January 1, 2012. However, a taxpayer may choose to apply the agreement for all taxable years beginning after December 31, 2008.

Tags: 894 Competent Authority, 894 Permanent Establishment, 894 Treaties, Country - Canada

Belgian Municipal and Conurbation Income Taxes are Covered by the Treaty


In the recently released Announcement 2012-30, the IRS announced that the U.S. and Belgian competent authorities have agreed that Belgian municipal and conurbation income taxes are included in the income taxes covered under Article 2, Paragraph 3(a) of the Belgium-U.S. Income Tax Treaty.

“Conurbation” is a new word for me. According to my dictionary it means “an extensive urban area resulting from the expansion of several cities or towns so that they coalesce to retain their separate identities.”

Tags: 894 Competent Authority, 894 Treaties