THE LEGAL REGIME FOR THE TAXATION OF BUSINESS PROFITS IN THE LIGHT OF THE OECD1 MODEL CONVENTION ON INCOME AND CAPITAL TAXES
THE LEGAL REGIME FOR THE TAXATION OF BUSINESS PROFITS IN THE LIGHT OF THE OECD1 MODEL CONVENTION ON INCOME AND CAPITAL TAXES

Author(s): Alexandru Armeanic, Anatolie Cananău
Subject(s): Economy, Law, Constitution, Jurisprudence, International Law, Law on Economics, Financial Markets
Published by: CEEOLPRESS
Keywords: insolvency; bankruptcy; restructuring; special administration; systemic crisis; insolvency regime; guarantee fund; liquidation; moratorium; creditor;
Summary/Abstract: The OECD Model Convention on Income and on Capital Taxes deals in Article 7 with the tax treatment of profits of enterprises from economic activities, with the exception of those from shipping and aviation (set out in Article 8). The research also carried out a correlative analysis of other articles of the Convention, given the importance, as an interpretative component, of the application of the provisions of Article 5 (on permanent establishment) with those of Article 7 (profits of enterprises). The correct application of Article 7 is conditional on a proper understanding of the concept of permanent establishment, and numerous arguments are put forward in support of this assertion. This is apparent from the very structure of the first paragraph of Article 7, which lays down the rule for taxation of profits from business activities by the State of residence. There is an exception in this case: where the taxable person carries on business activities using a permanent establishment situated in the source State, the right of taxation accrues to the source State, but only in respect of those profits which arise from activities carried on in the permanent establishment. In other words - the source State will not be able to tax profits arising from business carried on in the territory or to the extent that they do not arise from activities carried on at the permanent establishment.

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