News & Insights

The results of the 2025 Tax Treaty Survey are presented below.

#1 Treaty Negotiations Countries

NFTC member companies responding to the survey (“respondents”) ranked several countries as a top priority for U.S. tax treaty priorities. 

Switzerland was the country most frequently identified as the top priority for respondents. Reducing withholding rates on Dividends was the most important tax treaty negotiation item, followed by Limitation on Benefits (“LoB”), Mutual Agreement Process (“MAP”), and reducing withholding rates on Interests and Royalties.

For Taiwan, ranked as the top priority with the second highest frequency, Permanent Establishment (“PE”) was the most significant negotiation item, followed by reducing withholding rates on Interests and Dividends and residence issues. 

The next tranche of countries listed as a top priority for respondents included Brazil, Italy, Israel, Saudi Arabia, and Singapore. The negotiation items listed as most significant for each of these countries were:

• Brazil: Transfer Pricing was most significant, followed by reducing withholding rates on Royalties and Dividends, MAP, and PE. Business Profits and Covered Taxes were also mentioned.
• Israel: Reducing withholding rates on Dividends was most significant, followed by Transfer Pricing, MAP, Covered Taxes and reducing withholding rates on Royalties. Business Profits, Non-discrimination, and reducing withholding rates on Interest were also mentioned.
• Italy: Reducing withholding rates on Royalties was most significant, followed by MAP and PE. Reducing withholding rates on Dividends and Interest was a concern. Gains and Transfer Pricing were also mentioned.
• Saudi Arabia: MAP was most significant, followed by PE, Business Profits, and Transfer Pricing. Reducing withholding rates on Royalties, Dividends, and Interest was also mentioned. Covered Taxes, Non-discrimination, and Fiscal Transparency Entity were also concerns.
• Singapore: Reducing withholding rates on Royalties was the most significant concern, followed by PE, MAP, Business Profits, and reducing withholding rates on Dividends and Interest. Transfer Pricing and Non-discrimination were also mentioned as concerns.

These results present a change from the 2023 and 2024 tax survey responses, where Brazil was listed as the clear priority. 

Overall Treaty Negotiations Countries

After determining the overall top priority country for respondents, we aggregated the results regardless of priority ranking. Atop the list of highest overall priority and receiving the most total mentions was Brazil, followed by Singapore, then India. Next followed Switzerland, in its own tranche, followed by a grouping of Israel and Saudi Arabia. A fourth tranche featured the Republic of Korea and Argentina, and a fifth tranche consisted of Taiwan and Italy. The next group consisted of China, Malaysia, The Netherlands, Peru, Luxembourg, the UK, Australia and Colombia.

In total, respondents requested negotiations with 29 countries.

The treaty negotiation priorities for most countries are listed above. The negotiation items for countries not previously listed are:  

• • Argentina: Reducing withholding rates on Royalties was the primary concern, followed by Transfer Pricing and MAP. Gains and Covered Taxes were also concerns. Business Profits, Covered Taxes, reducing withholding rates on Dividends and Interest, Fiscal Transparency Entity, and PE were also mentioned.
  • Australia: Reducing withholding rates on Royalties was the most significant concern, followed by MAP.
  • Colombia: Respondents were most concerned with Business Profits and reducing withholding rates on Royalties, followed by reducing withholding rates on Dividends and Interest, and Gains.
  • India: Reducing withholding rates on Royalties was the most significant concern, followed by Transfer Pricing. Reducing withholding rates on Dividends, MAP, and Business Profits were concerns, with reducing withholding rates on Interest, Covered Taxes, LoB, Fiscal Transparency Entity, and Gains also mentioned. 
  • Korea: Transfer pricing was the most significant concern, followed by MAP, withholding rates on Royalties and Dividends. 
  • Luxembourg: Reducing withholding rates on Interest was the primary concern, followed by LoB, MAP, and reducing withholding rates on Royalties. Business Profits were also a concern. 
  • UK: Transfer Pricing and reducing withholding rates on Dividends were primary concerns, followed by LoB and reducing withholding rates on Interest and Royalties. 

Compared to last year’s results, Brazil maintained its top position and Singapore fell slightly  into the second tranche. India, Switzerland, Israel, Saudi Arabia, and Argentina all dropped in the priority rankings, and were joined by new addition South Korea. Taiwan moved from third tranche to seventh tranche, and was joined by new addition Italy. China, the UK and Australia all moved from the fourth to eighth tranche, and were joined by Malaysia, the Netherlands, Peru, Luxembourg and Colombia, all new additions to this year’s list.

An infographic with the results can be found here.

The survey also asked respondents to provide details about their tax treaty concerns.

Tax Treaty Implementation Issues

The survey asked respondents to provide details about examinations, settlement problems, and procedural issues encountered in obtaining tax treaty benefits.

• • In Australia, respondents reported an array of issues, primarily with aggressive tax positions and impediments to accessing competent authority review. 
    • Main citations included issues related to PE, denial of MAP and concern over future denial of MAP. 
    • Australia was among the most frequently cited countries to pose aggressive tax positions, specifically with regard to treating outbound services payments as royalties, embedded royalties, and overly broad application of the General Anti-Avoidance Rule (“GAAR”). 
    • It was also noted that Australia has discouraged the pursuit of competent authority, and has inappropriately taxed hybrid instruments resulting in entity taxation unrelated to any transactions including Australia.
  • Australia and Italy were mentioned to have applied domestic interpretations of treaties that disregard Paragraph 14.4 of Article 12 of the OECD Model Treaty.  
  • Italy was cited as holding aggressive tax positions out of line with widely accepted tax principles. 
    • These included issues with beneficial ownership rules with respect to dividends, and inappropriately deeming digital services revenue share payments as royalties when they should be considered business profits under the treaty. 
    • Respondents also noted issues with adjustments related to PE in denying access to competent authority review.
  • In France, respondents reported aggressive denial of access to competent authority and advanced pricing agreements (“APA”), and issues with transfer pricing, including unfair denial of transfer pricing changes that are in line with comparable transactions.
    • Respondents also face difficulty related to settlements in France, noting they are often conditional upon agreement not to take the matter to MAP. Likewise, respondents noted challenges related to the requirement to settle disputes more favorably in exchange for an agreement not to seek double tax relief from the competent authority.
  • Respondents fear criminal risk for raising tax disputes in Italy and France.
  • Germany often either requires or greatly incentivizes an agreement not to seek competent authority relief. 
    • Procedural impediments to enjoying treaty benefits were also cited, including excessive information requirements and lengthy wait periods. These impediments were noted especially with regard to the receipt of withholding tax clearance certificates. Aggressive transfer pricing and intellectual property (“IP”) practices, such as continued implementation of Section 49, were also mentioned.
  • Respondents highlighted several issues with India:
    • Many of these issues are related to aggressive tax positions, including treating all services as ‘included services’ subject to withholding taxes, routinely taking positions contrary to widely accepted tax principles, like unconventional PE interpretation and withholding taxes on payments for services performed outside India. 
    • Respondents also cited procedural impediments, including burdensome requirements when requesting withholding tax refunds and litigating the receipt of refunds. Respondents noted difficulty in obtaining refunds is partially a result of India using different theories after winning a dispute to apply a new assessment of a similar amount, then denying the refund by applying it to the new assessment.
  • On the issue of value generation, Brazil, India, and certain countries in the Middle East and Africa were cited to have taken positions that misconstrue in-country activities to generate significantly more value than those activities actually generate, which results in lengthy transfer pricing disputes. 
  • Respondents cited issues with Mexico regarding aggressive tax positions out of line with widely accepted principles, especially regarding transfer pricing and the disallowance of deductions for cost of goods sold. 
    • Respondents are also facing difficulties due to Mexico’s challenging of cross-border transactions under domestic law rather than transfer pricing to prevent access to the competent authority. 
  • In Mexico and Indonesia, respondents have faced challenges in accessing competent authority review because these countries have denied intercompany expenses altogether based on flawed theories that they are not considered Section 162 ordinary and necessary expenses under domestic law.
  • Indonesia was cited as presenting challenges related to delays in withholding tax refunds, with some stating the process has dragged on for several years. 
  • The disallowance of royalties to the U.S. was cited as a concern in both South Korea and Indonesia. South Korea does so by applying a below-industry royalty rate, while Indonesia states no valid reason for such disallowance.
  • In South Korea, aggressive tax positions included the application of above-market interest rates to impute additional interest income and a novel application of gift tax on entity movements. It was also noted that South Korea has denied MAP under a novel beneficial ownership theory.
  • In Poland, respondents noted a great procedural and documentation burden, which interferes with proper administration of the treaty and results in extended wait times for refunds.

• Respondents noted challenges in Kazakhstan and Mexico relating to transfer pricing issues, but specifically that these countries challenge the deductibility of advertising and promotion despite an APA.

• Transfer pricing issues were noted in several other countries, including Canada and Israel, specifically related to IP sales out of Israel. It was noted that Ecuador disregards transfer pricing documentation and reassesses using inconsistent standards.

• Other dispute resolution barriers were noted. In Malaysia, respondents have faced aggressive positions regarding real property Gains tax calculation. 
• In Venezuela, respondents had challenges obtaining residence certificates. 
• In Nigeria, respondents had to pay assessed tax liabilities prior to dispute resolution.

NFTC Requests for amendments to existing treaty provisions

The survey asked respondents for cases in which an amendment to a current tax treaty or the provision of a new tax treaty is desired.

• Once again, as in 2024, respondents highlighted the need for binding arbitration mechanisms as an international standard in treaties. Respondents also highlighted the general need for dispute resolution procedures in tax treaties.
• Respondents expressed a need to decrease withholding taxes on dividends in Taiwan, Israel, Korea, and Canada to be in line with other U.S. treaties.
• A need to eliminate, or at least clarify, withholding taxes on services performed outside the country was reported, especially with regard to India, but also in Uzbekistan and Taiwan.
• With regard to Ireland, respondents expressed concern over tax residence ambiguity and requested clarification of tax resident determination guidelines and the establishment of clear dispute resolution procedures.
• Respondents expressed a desire to increase tax treaties in Latin American nations to reduce withholding rates.

IRS Advanced Pricing and Mutual Agreement Program

This year, the survey included a new question asking respondents to report concerns or issues with the IRS Advanced Pricing and Mutual Agreement Program (“APMA”). 

• Staffing and funding were key concerns, specifically understaffing and associated delays and negotiation setbacks. Some were concerned about retirements and terminations decreasing experience levels in the program. Respondents were troubled over the reduction in resources available to APMA and the IRS.
• Respondents were concerned with the length of the resolution process, which is currently estimated at more than three years. They noted the importance of speedy resolution due to how quickly the nature of business can change. There were further concerns about reduced capacity and potential increases in delays.
• Respondents had issues with reversals of acceptance.
• Respondents were concerned about the granting of telescoping, especially with regard to the administrative burden of filing correlated state returns.