US Tax Laws and Treaties

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1. There are both positive and not quite so positive components of the fact that U.S. law grants equal status to domestic legislation and to tax treaties. One of the primary purposes of the latter, in the case of bilateral treaties, is to prevent double taxation (Tax Treaties and Tax Planning Revised, p.1), which is good. However, there are differences between treaties, which mean that a different set of 'laws' applies to both individuals and corporations. As such, there is the propensity to be an atmosphere of ambiguity created by these treaties which very rarely takes place where domestic law is concerned. Such ambiguity is rarely a good thing, and has the possibility of creating loopholes which is bad. The degree of interpretation which the multitude of treaties allows for enables both individuals to and corporations to manipulate them, in a way that is decidedly more difficult to do with domestic law. However, the principle benefit of the equal status between treaties and law is that the latter one prevails in the event of a dispute (Tax Treaties and Tax Planning Revised, p. 4), so that a swift reconciliation is certainly possible. 2. The primary means in which a corporation is able to do so is to qualify for benefits in the 1996 U.S. Model Treaty. There are actually a couple of different ways in which corporations can access these benefits in international transactions. One of the ways is if that corporation is regarded as a fiscally transparent partnership in another

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