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One of the main aims of double tax treaties is to bring consistency and increase tax certainty in the area of entitlement of tax treaty benefits and income attribution. However, there is no tax certainty in the application of tax treaties to personal services companies since there is no one agreed algorithm for the application of double tax treaties to such cases. The various provisions of Model Tax Conventions treat PSCs differently. This research is an attempt to extrapolate principles applicable to the provisions of Model Tax Conventions to the persons with similar features of personal services companies on the wider scope of personal services companies.

The research related to conflicts in the attribution of income in such a cases is insufficient.

The potential application of the double tax treaties to PSCs gives a rise to the conflicts in the attribution of income, starting from the entitlement to the treaty benefits and to the application of distributive rules. Based on the evaluation of different types of provisions and norms it is not that easy to extrapolate principles from other provisions to the personal services company regime.

Provisions analysed in the research provided the discussion of the comparison between fiscally transparent partnerships and personal services companies and the possibility to apply the principles expressed in the Partnership Report to personal services companies. The research addresses the recognition of the personal services company regime as a domestic anti-abuse rule, as well as potential extrapolation of the Article 17 OECD MTC, Article 5 OECD MTC and Article 14 UN MTC provision to a wider scope of the PSCs as norms which may be applicable in the attribution of the income cases. All these provisions can be applied partially or to a certain cases of PSCs. However, there the legislative gaps in application of these provisions to a wider scope of PSCs remain and mismatches of the income attribution may occur.

The Partnership Report is difficult to apply to the cases with personal services companies.

Some principles of the Report (for instance, a principle that the domestic law is a starting point for the determination of a taxable person) may be applied, however, the principle is generic because every tax treaty establishes the application of domestic law as a first step.

Other more specific principles may bring even more complexity to the application of double tax treaties to cases with personal services company regime because the recognition of a company as a personal services company does not mean the application of the same rules in

all the contracting States. In case of more complicated mismatches of income attribution, the Report does not answer questions that could be addressed while solving the case.

In the case of recognition of the personal services company regime as a domestic anti-abuse rule there are also some complexities. Because of differences in domestic legislation, the courts may come to different conclusions on income attribution and how it was in the Russell and the Aznavour cases.

As the result of applying this algorithm when the recognition of the taxpayer and attribution of profits are exercised according to domestic legislation, the consistent result is lacking.

Potential consequences could be a change of the taxpayer or a taxable person, application of another double tax treaty, or refusal of the double tax relief provision.

It also seems not possible for Art. 17(2) OECD MTC to be applied to PSCs and the scope of the Article to be broadened to other categories of professionals other than entertainers and sportspersons because one of the reasons why these distributive rules were implemented is absent. Many other kinds of professionals are not mobile like performers are and there are various methods of tax avoidance prevention that can be applied to other individuals and their personal services companies. The creation of several places of working could cause the risk of a PE constitution and it does not seem possible to expand the scope of the Article in this direction because entertainers and sportspersons are very specific concepts.

Furthermore, the “look through” approach is unlikely applicable when the income is coming from various sources and as a result, it becomes complicated to count the proportion of profits received by the individual and the company. It increases the risk to allocate profits and then tax incorrectly.

Article 14 UN MTC and its parallel provision related to services PE expressed in Article 5 OECD MTC could be that provision that could apply to personal services companies. In the subsection related to the topic, it was described how to solve the possible mismatch of income attribution. Since Article 14 UN MTC has been eliminated from the text of the OECD MTC a significant amount of time ago, not all double tax treaties include it in the text. In this case, Article 5 would replace Article 14 with the same rule of the allocation rule change. There is a possibility of economic double taxation, however, as it was mentioned in the preamble and then discussed in the Russell case, there is no obligation for double tax treaties to prevent economic double taxation.

This area of research is not well-developed. Such regimes of taxation need further research and analysis to provide a uniform algorithm of the income attribution to them and guidance on the entitlement of the tax treaty benefits. A potential short-term solution to the absence of a

uniform approach to tax treaties application to personal services companies could be following the principles related to the application of one of the mentioned provisions of Model Tax Conventions to the personal services companies. In the long term, a unique algorithm for the application of tax treaties to personal services companies shall be found and it should take into account all the specific features of such kinds of regimes.

Although tax treaties are aiming to give tax certainty to taxpayers, there is no tax certainty in the application of tax treaties to cases with personal services company regimes.