International Taxation of Commercial Banks

The banking business has significant impact on the entire economic growth in which banks are considered as an engine of economy growth and development, even though international tax studies of these institutions are still not equal to their role. Most international transactions, either on products or services, settle between banking institutions in different jurisdictions in which they are “the vehicles of international capital flows.” Indeed, the 2008 financial crisis is the best example to prove how the banking business is an important enterprise which started with a singular financial institution and then affected most economic enterprises all over the world. However, the model does not assign a special article to banks’ taxation; the commentary and other OECD reports included many paragraphs and detailed explanation approaches regarding banking income attribution. Also, comparative law provide a lot of special tax provisions. For example, the U.S. Banking and Bank Code provide the entire fourth chapter to banks taxation– which carry the title “taxation” – in addition to many special provisions in the U.S. tax code, typically and reasonably all that arises is the logical question: Is banks taxation treatment in fact a special and exceptional case on a general rule that applies to other businesses and corporations? The main point of this research is to examine to what extent the OECD model would apply to banking business and how treated banking offices and income generated from banking business and particularly examine to what extent banking branches and other offices would be sufficient to constitute a PE as provided under Article (5), and examine to what extent Articles (7) and (11) would apply to interest income. Also, this work tries to address other issues attached to the main one such as whether or not commercial banks are subjected to a special treatment that constitutes an exception to the general treatment that applies to other corporations. Further, this work attempts to determine a clear definition of “Bank” and “Banking Business” terms, and recognize them from other enterprises. Finally, it tries to evaluate the current tax treatment, whether or not it is efficient and relevant with specialty characteristic of banking business