Regla de desempate para la residencia fiscal de empresas en el marco de la LMI. Crítica a la regla de desempate para la residencia fiscal de las empresas en virtud de la LMI

Abstract

The report of the "four economists» in the early1920s to the league of nations is widely regarded in tax treaty literature as the most influential body of work yet. Their work shaped the design of tax treaties and argued in an extraordinary and groundbreaking manner for the removal of double tax impediments to the free flow of capital in a post-world war one economy
desperately trying to become globalized. The four economists also argued in their report that the economic allegiance theory was the key to determining the tax residence of companies in instances of dual tax residence. While recognizing the difficulty in apportioning capital across multiple jurisdictions where a company's business crosses borders, and eschewing political allegiance criteria such as place of incorporation from determining corporate tax residence; they argued that where the company is headquartered or where the "brains» of the company meet should be the factor that determines the jurisdiction the company owes its economic allegiance, and where it should therefore be taxed. Consequently, for the next ninety-five years, in a movement championed in large part by the Organisation for Economic Cooperation and Development (OECD), their idea came to be known as the "place of effective management» (POEM) criteria for breaking dual tax residence, and a huge percentage of tax treaties have adopted varying forms of the POEM. However, in a radical shift in approach in 2017 through amendments to the draft OECD Model Tax Convention and the design of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI); the OECD now advocates for mutual agreement procedure and denial of treaty benefits as the preferred approach to resolving cases of dual tax residence of companies. While the shortcomings of the POEM criteria called for an urgent review, the radical change in approach questions whether the new approach aligns with the economic allegiance theory or whether this approach would bring an end to problems associated with the POEM criteria or whether the economic allegiance theory is an outdated concept that serves no useful role in resolving dual tax residence in the tax treaties of the future. This paper, therefore, seeks to attempt to provide an answer to these questions, analyse the efficacy of tiebreaker rules in the MLI, and make recommendations for improvement.