At sixes and sevens : the relationship between the taxation of business profits and income from immovable property under tax treaties

This article discusses the relationship between Art. 6 (Income from immovable property) and Art. 7 (Business profits) of the OECD Model Tax Convention. The issue examined is whether it is appropriate for Art. 6 to apply in preference to Art. 7 in all circumstances. After an overview of Arts. 6 and 7, the article considers the potential overlap between them, which involves the situation where immovable property constitutes a permanent establishment under Art. 5 and where income from immovable property constitutes business profits. The article also examines the relationship between Art. 6 and the other distributive articles of the OECD Model to see if those relationships provide any insight into the proper relationship between Arts. 6 and 7. The implications of the OECD Discussion Draft on the Attribution of Profits to Permanent Establishments for the relationship between Arts. 6 and 7 is explored briefly. The article concludes that it is inappropriate for Art. 6 always to trump Art. 7 and considers some possible changes to modify that result.