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Fiscal Affairs Department
How to Design a Regional Tax Treaty and Tax Treaty Policy Framework in a Developing Country
Prepared by Kiyoshi Nakayama
INTERNATIONAL MONETARY FUND
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©2021 International Monetary Fund
Cover Design: IMF Creative Services
Composition: The Grauel Group
HOW TO NOTE
Fiscal Affairs Department
How to Design a Regional Tax Treaty and Tax Treaty Policy Framework in a Developing Country
Prepared by Kiyoshi Nakayama
Names: Nakayama, Kiyoshi, 1958- | International Monetary Fund. Fiscal Affairs Department, issuing body. | International Monetary Fund, publisher.
Title: How to design a regional tax treaty and tax treaty policy framework in a developing country / prepared by Kiyoshi Nakayama.
Other titles: How to notes (International Monetary Fund)
Description: Washington, DC : International Monetary Fund, 2021. | April 2021. | Includes bibliographical references.
Identifiers: ISBN 9781513577012 (paper)
9781513577036 (Web PDF)
9781513577029 (ePub)
Subjects: LCSH: Double taxation—Treaties—Design. | Fiscal policy—Developing countries—Design.
Classification: LCC K4475.N35 2021
DISCLAIMER: Fiscal Affairs Department (FAD) How to Notes offer practical advice from IMF staff members to policymakers on important fiscal issues. The views expressed in FAD How to Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Contents
Acronyms
Glossary
1. Introduction
2. Regional Tax Treaties
3. Regional Tax Treaty Policy Framework
4. Group Treaty Negotiations
5. Conclusion
References
Acronyms
| BEPS | Base Erosion and Profit Shifting |
| CARICOM | Caribbean Community |
| CEMAC | Central African Economic and Monetary Union |
| CIT | Corporate Income Tax |
| EOI | Exchange of Information |
| EU | European Union |
| IBFD | International Bureau of Fiscal Documentation |
| IFFs | Illicit Financial Flows |
| LOB | Limitation on Benefits |
| MAAC | Convention on Mutual Administrative Assistance in Tax Matters |
| MFN | Most-Favored-Nation |
| MLI | Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting |
| MNEs | Multinational Enterprises |
| OECD | Organisation for Economic Co-operation and Development |
| OIT | Offshore Indirect Transfer |
| PCT | Platform for Collaboration on Tax |
| PPT | Principal Purpose Test |
| UN | United Nations |
| VAT | Value-Added Tax |
| WAEMU | West African Economic and Monetary Union |
Glossary
| Conduit financing arrangement | A series of transactions by which one person (financing entity) advances money or other property, or grants rights to use property, to another person (financed entity) through one or more other persons (intermediate entities). This can be used for treaty shopping. For example, a series of financing transactions is structured in a way that a resident (intermediate entity) of a contracting state (X) entitled to the benefits of the tax treaty receives interest paid by a resident (the financed entity) of the other contracting state (Y) but that resident (inter mediate entity) pays, directly or indirectly, all or substantially all of that interest (at any time or in any form) to another person (financing entity) who is a res ident of a third country (Z) which does not have a tax treaty with Y. With this arrangement, the financing entity can enjoy the benefits of a tax treaty between X and Y. |
| Regional economic community | A form of regional integration to foster cooperation and economic integration, such as a free trade area, a monetary union, or a custom union. |
| Regional model tax treaty | An agreement among regional economic community members on preferred tax treaty positions to pursue in negotiations of a bilateral tax treaty with noncom- munity countries. |
| Regional tax treaty | A multilateral tax treaty concluded only by member countries of a regional economic community. |
| Tax treaty policy framework | A set of documents that establish and explain the main policy outcomes that a country wishes to achieve when negotiating tax treaties. |
| Treaty shopping | Arrangements through which a person who is not a resident of a Contracting State may attempt to obtain benefits that a tax treaty grants to a resident of that State. |