Subject-to-tax clause
The legal term subject-to-tax clause (German also fallback clause ) comes from international tax law , where it is agreed within double taxation agreements.
The OECD Model Convention does not contain such a clause, but Germany in particular has agreed it in many (more recent) double taxation agreements, mostly as a supplement to the method article (usually Article 24 of the OECD Model Convention, for example in the context of an additional protocol). One example is the DTA with Italy (additional protocol to Art. 24).
While double taxation agreements basically aim to avoid (or reduce) actual double taxation , a subject-to-tax clause agreed in the agreement is directed against virtual double exemption. This would arise if the State , which would be entitled the right of taxation, according to DBA (usually the source country actually makes no taxation), while the income in another state (usually the state of residence would be released following) the DBA. In this case, the subject-to-tax clause stipulates that the country of residence may apply taxation. It is therefore also known as a fallback clause, which prevents the creation of white income .
There are also various fallback clauses in national tax law, in particular Section 50d (8) to (12) EStG.
Individual evidence
- ↑ to this u. a. BFH, judgment of December 17, 2003 , Az. I R 14/02, full text
