Qualification conflict
In international tax law, a qualification conflict is a situation in which two countries that have concluded a double taxation agreement (DTA) treat ( qualify ) the taxable facts differently .
The tax liability is assessed according to the national regulations of the individual states. If tax liability is affirmed in both the first and the second state, so-called double taxation can arise. To avoid this, the states conclude a double taxation agreement with one another.
Since the double taxation agreement does not establish any tax liability, but only grants the tax collection authority to either one or the other state, a different assessment of taxable transactions can lead to the application of different articles of the DTA.
species
A distinction is made between subject qualification conflicts and object qualification conflicts .
In the case of subject qualification conflicts , the contracting states do not agree on who should be taxed. For example, participates in a German partnership a Spanish shareholder. According to German law, a partnership is transparent and its profits are taxed at the level of the partner. The German tax authorities want to tax the profit share of the Spanish co-partner in Germany. Spain, on the other hand, qualifies the partnership as a corporation , so that under Spanish law the partnership itself is to be taxed, while the profit sharing of the Spanish co-partner is taxable in Spain.
In the case of object qualification conflicts , the contracting states do not agree on what should be taxed. In the example above, the German tax authorities want to tie in with commercial activity and thus apply the corresponding article in the DTA. In Spain, on the other hand, one ties in with dividend taxation and thus with the dividend article.
