Limitation on Benefits Provisions: Analyzing Article 22, U.S. Model Treaty and LOB in Specific U.S. Tax Treaties

Article 22 of the 2016 U.S. Model Income Tax Convention contains the LOB provisions. These provisions were designed to prevent treaty shopping--utilizing low withholding, exemption from withholding, or low tax rates provided by treaties in third countries. Article 22 contains four tests often found in U.S. income tax treaties that taxpayers can use to meet residency requirements, without consideration given to underlying motives, and qualify for treaty benefits.

Aware of the substantive tax benefits of U.S. income tax treaties, the IRS' Large Business and International Division has an active campaign targeting nonresident alien tax treaty exemptions. International taxpayers can unlock valuable benefits in U.S. income tax treaties by meeting the criteria of the LOB provisions. Tax advisers and multinational taxpayers must understand how to analyze and interpret these paragraphs in treaties since not meeting the requirements can negate otherwise available benefits.

Listen as our panel of foreign tax experts examines the limitation on benefits provisions in U.S. income tax treaties for international taxpayers and their advisers.

1. LOB provisions in treaties: an introduction
2. LOB definition and purpose
3. U.S. Model Treaty, Article 22
4. Typical compliance tests
5. LOB examples from specific countries
6. Withstanding IRS challenges

The panel will cover these and other critical issues:

• Utilizing the LOB provisions to obtain specific treaty benefits
• Applying LOB criteria in specific countries based on the relative U.S. income tax treaty
• The state of the current IRS initiative regarding nonresidents' eligibility for treaty benefits
• Qualifying for residency under Paragraph 1 of the U.S. Model Income Tax Treaty

Learning Objectives

After completing this course, you will be able to:

• Identify the LOB clause in specific treaties
• Determine how to meet residency requirements under Article 22, Paragraphs 1-4 in the U.S. Model Income Tax Convention
• Decide the benefits of meeting LOB criteria for multinational taxpayers
• Ascertain differences in LOB provisions in the U.S. Model Treaty and the U.S. treaties with certain countries

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).