The Use of the OECD Commentary
Elgar Tax Law and Practice series
Chapter 6: INCOME FROM EQUITY AND FROM DEBT (ARTT. 10 AND 11)
A ‘dividend’ is a distribution of profits to shareholders by: ‘corporations’; companies limited by shares; limited partnerships with share capital; limited liability companies; and by other joint stock companies. Such legal entities with a separate juridical personality distinct from their shareholders differ from partnerships (which do not have juridical personality). In fact, in respect of profits of a business carried on by a partnership, a partner is taxed personally on her/his share of partnership capital and partnership profits, while in respect of profits of a business carried on by a corporation, a shareholder is taxable only on those profits distributed by the company. Art. 10 § 1 does not prescribe the principle of taxation of dividends either exclusively in the RC (State of the beneficiary’s residence) or in the SC (the CS where the payer of the dividends is resident). Exclusive allocation of taxing rights in the RC, notes the Commentary, is not feasible as a general rule; moreover it would be unrealistic to suppose that all taxation of dividends at source be relinquished. By contrast, exclusive taxation of dividends in the SC would not be acceptable as a general rule because some States do not tax dividends at source and all States tax residents in respect of dividends they receive from non-resident companies. So Art. 10 § 1 introduces concurrent taxation in the RC and the SC and provides that dividends may be taxed in the RC. The Commentary notes that the term ‘dividends paid ’ used by Art.
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