Announcement 2013-38 - Competent Authority agreement with Belgium on treatment of business profits of permanent establishments 

August 30:  Announcement 2013-38 provides text of a Competent Authority agreement between the United States and Belgium with respect to Article 7 (Business Profits) of the United States-Belgium income tax treaty concerning the treatment of business profits attributable to permanent establishments.

Announcement 2013-38 is included in the September 3rd edition of the Internal Revenue Bulletin [PDF 914 KB].

The Competent Authority agreement addresses application of the principles set forth in the Organisation for Economic Cooperation and Development (OECD) Report on the Attribution of Profits to Permanent Establishments (the Report) in the interpretation of Article 7 (Business Profits) of the United States-Belgium income tax treaty and provides:

The competent authorities of the United States and Belgium therefore agree that, under paragraph 1 of the Protocol, Article 7 of the Convention is to be interpreted in a manner entirely consistent with the full [authorized OECD approach] as set out in the Report. All other provisions of the Convention that require a determination of whether an asset or amount is effectively connected or attributable to a permanent establishment are also to be interpreted in a manner entirely consistent with the full [authorized OECD approach] as set out in the Report.

Where, in accordance with the full [authorized OECD approach] as set out in the Report, a Contracting State adjusts the profits that are attributable to a permanent establishment of an enterprise of one of the Contracting States and taxes accordingly profits of the enterprise that have been charged to tax in the other State, the competent authorities of the United States and Belgium agree that the other Contracting State shall, to the extent necessary to eliminate double taxation, make an appropriate adjustment if it agrees with the adjustment made by the first-mentioned State; if the other Contracting State does not so agree, the Contracting States shall eliminate any double taxation resulting therefrom by mutual agreement.

The Competent Authority agreement generally applies to tax years that begin on or after January 1, 2013, but a taxpayer may elect to apply the provisions in the agreement in both countries for all tax years beginning after December 31, 2008.

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