United States

The United States has 66 tax agreements in force as reported in its response to the Peer Review questionnaire. None of those agreements comply with the minimum standard.

The United States made a general statement in its response to the Peer Review questionnaire that it intends to implement a detailed LOB rule as part of its commitment to implement the minimum standard in all of its bilateral agreements. The detailed LOB is not available through the MLI and requires substantive bilateral discussions and modifications with respect to each treaty.

The United States has implemented LOB clauses in most of its agreements. It started to include anti-treaty-shopping measures in 1962,1 and since the seventies, LOB clauses (which initially targeted investment or holding companies) have appeared in agreements concluded by the United States. All of the United States’ agreements are supplemented by its domestic anti-conduit regulations.2

The 2016 US Model Convention contains an express statement that the tax treaty should not create opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this Convention for the indirect benefit of residents of third states).

The United States’ agreements with the following 45 jurisdictions contain an LOB rule and are supplemented by domestic anti-conduit rules: Australia, Austria, Bangladesh*, Barbados, Belgium, Bulgaria, Canada, China (People’s Republic of), Cyprus*, Czech Republic, Denmark, Estonia, Finland, France, Germany, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Portugal, Russian Federation, the Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey, Ukraine, Venezuela*. Signed conventions with Hungary and Poland contain an LOB rule and are supplemented by domestic anti-conduit rules. The agreements with Egypt, Korea, Morocco, Norway, and Trinidad and Tobago have a limited anti-treaty shopping rule and are supplemented by domestic anti-conduit rules. The agreement with the United Kingdom contains an LOB and anti-conduit rules and is supplemented by domestic anti-conduit rules.

No jurisdiction has raised any concerns about their agreements with the United States.

← 1. With respect to the United States’ agreement with Luxembourg.

← 2. See I.R.C. §7701(l), added to the Internal Revenue Code by section 13238 of the Omnibus Budget Reconciliation Act of 1993, P.L. 103-66 (allowing the Internal Revenue Service to re-characterise any multiple-party financing transaction as being a transaction directly among any two or more of its parties whenever appropriate to prevent the avoidance of the United States’ tax); Treas. Reg. § 1.881-3 (as amended in 2020) (providing additional guidance relating to conduit financing arrangements). In addition, the United States has judicial doctrines such as substance-over-form and economic substance that may achieve a similar result in addressing conduit arrangements.

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