Pending Protocol Will Prevent Inverted Corporations from Accessing the Barbados Treaty
Year: 2005
Type: preprint
Abstract: The article describes in detail the new protocol to the U.S.-Barbados Income Tax Treaty, signed on July 14, 2004. As explained therein, a principal purpose of the new protocol was to prevent formerly U.S.-based multinational corporations that have engaged in inversion transactions, and that have little or no meaningful connection to Barbados, from enjoying the benefits of the treaty. The article first sets forth the requirements for treaty benefits, under the provisions of the treaty as in existence prior to the protocol. The article next describes the relatively strict U.S. tax rules applicable to U.S.-owned multinational groups, the more favorable U.S. tax rules applicable to foreign-owned groups and the inversion process whereby a number of U.S. multinationals have reinvented themselves as foreign-based multinationals in order to elect out of the first set of rules and into the second. The article also describes the manner in which such inverted corporations have taken advantage of U.S. income tax treaties, particularly the treaty with Barbados, in order to obtain further U.S. tax benefits. Next, the article describes in detail the provisions of the new protocol, which make it extremely difficult, if not impossible, for inverted corporations to access the U.S. Barbados Income Tax Treaty. Finally, the article considers what implications the new protocol may suggest for future U.S. income tax treaties.
Source: SSRN Electronic Journal
Author: Michael J. Miller
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2264352805