Non-discrimination clause in tax treaties – Select issues and recent developments – Part 6


In part 5 of the series, I have discussed Article 24(4) which deals with deduction non-discrimination in detail. In this part, I will discuss Article 24(5) which deals with ownership based non-discrimination and Article 24(6)

This paragraph prohibits a contracting State to give less favourable treatment to an enterprise, the capital of which is owned or controlled, wholly or partly, directly or indirectly, by one or more residents of the other contracting State.

For ex. – Enterprise in State ‘A’ which is wholly or partly owned or controlled, directly or indirectly by residents of State ‘B’ should not be subjected in State ‘A’ to any taxation or connected requirement which is other or more burdensome than taxation or connected requirement to which another Enterprise in State ‘A’, in the same circumstance, is subjected to.

Hence, the purpose of this clause is to safeguard an equal treatment to an enterprise in State A which is discriminated solely on account of foreign ownership.

Article 24(5) of the OECD and UN model is reproduced below –

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The views in all sections are personal views of the author.