David Tipping reviews the operation of the tiebreakers in Article 4(2) of the OECD Model Double Tax Treaty and replicated in most of the UK’s double tax treaties, and examines how each of the tiebreakers works to resolve conflicts arising out of a taxpayer’s dual residence for the purposes of the treaty.
An understanding of double tax treaties (DTTs) is essential for advising any taxpayers with international tax affairs.
DTTs allocate taxing rights between the two contracting states. However, a DTT requires the taxpayer to be a resident of one, and only one, of the contracting states. This is frequently not the case. Internationally mobile clients can easily acquire a tax residence in multiple countries. This conflict is resolved by a series of tiebreakers to determine which state the taxpayer is resident in.
Like many other aspects of DTTs, the tiebreakers are normally derived from, or
