Why was my treaty claim refused when my company is resident there?
Because residence is necessary but not sufficient. A limitation on benefits article can deny a benefit to a resident of the treaty country if the entity cannot pass an eligibility test written to exclude conduits. So the refusal is not a challenge to where the company is resident; it is a finding that residence alone does not open the treaty. Two different questions sit behind a claim, and only one of them is answered by a certificate or an incorporation document. The second is whether the entity satisfies one of the tests in the article itself.
Which limitation on benefits test does my holding company meet?
The tests look at ownership, public listing, active trade or business, and base erosion. Which one an entity relies on is a question of its own facts, and the answer is not always the obvious one: a company with a listed parent and a company with substantive operations are relying on different tests and need different evidence. Read the tests as they appear in the version of the article in force for your treaty, then decide which one the entity actually satisfies and record it. Naming a test you have not evidenced is not a position.
What if my company does not meet any of the named tests?
There is a discretionary route where none of the tests is met. It is a request rather than an entitlement, so it is decided on what you put in front of the authority, and it takes time that a payment schedule will not usually wait for. That has a practical consequence worth acting on: find out early whether the entity fails all four tests, because the discretionary route needs to be started well before the payment it is meant to cover, not once a rate has already been refused.
When should we settle the limitation on benefits question?
Before the first payment. Documenting which test the entity satisfies belongs in the file at that point, not after a denial. The reason is structural rather than administrative: a payer decides a withholding rate when it pays, and if nothing supports the treaty rate then, the payer either withholds at the full rate or takes a risk it has no reason to take. Once the deduction has been remitted, you are recovering money instead of applying a rate. The analysis costs the same either way; the timing decides which of those two exercises you are in.
Does being listed on a stock exchange help our treaty claim?
Public listing is one of the four things the tests look at, so it can be the route an entity relies on. But it is a test with its own terms, and a group's structure decides whether a listing higher up the chain reaches the entity actually receiving the payment. That is the part that gets skipped. Work out which company is the recipient, then test that company, then keep the evidence for the position you took. A listing mentioned in a covering letter is not the same as a documented test in the file.
Does the payer need our limitation on benefits analysis on file?
In practice they will want something. A payer applying a treaty rate is making a decision it can be asked about later, so it wants to see what supports that rate before it pays rather than afterwards. Give it the position in the form it needs: which test the entity satisfies, on what facts, as at the payment date. Keeping the same analysis in your own file is the other half. A benefit can be denied to a treaty-country resident that fails the eligibility test, and neither party wants to find that out after the money has moved.
What happens if the two countries disagree about which of them can tax me?
The treaty has a procedure for exactly that. You apply to the competent authority in your residence country, which takes the case up with its counterpart, and the two negotiate a position that removes the double taxation. Some treaties add binding arbitration if they cannot agree. It is slow and it runs on documents, so the practical work is preserving the record and filing protective claims while the clock runs. See our treaty work.
Which countries have a tax treaty with the United States?
Around sixty, including Canada, the United Kingdom, India, Australia and most of western Europe — but the list matters less than the terms, because each treaty caps rates and allocates income differently. Two countries with treaties can produce opposite answers on the same pension or the same royalty. What decides your position is the specific article covering your income type. See our country guides.
