A French investor receives a dividend from a Portuguese company. A Belgian resident collects the proceeds of a building sold through an Andorran company. In both cases, two States can legitimately claim to tax the same income. Bilateral tax treaties exist to arbitrate that contest — nearly three thousand are in force worldwide, most built on the OECD model.
The order of operations
The reasoning always follows the same order, and inverting it leads to costly mistakes. First, the source State's domestic law: does it tax this income, and at what withholding rate? Then the treaty: does it reduce or remove that right to tax? Finally the residence State: how does it eliminate the residual double taxation — by credit or by exemption?
For dividends, the OECD model shares the taxing right: the source State keeps a withholding right capped by the treaty (often 5 to 15% depending on the participation), the residence State taxes the income and grants a credit for the withholding suffered. A dividend is therefore almost never "detaxed" by a treaty: it is ordered.
Real estate, a case apart
Property income follows a simpler, firmer rule: it is taxable where the building stands. That is true of rents — and true, a point often discovered too late, of gains on shares of so-called land-rich companies: most recent treaties let the State where the building sits tax the sale of the shares of the company holding it, as if the stone itself had been sold.
Interposing a company does not move a building. Most modern treaties look straight through.
What this changes in a club deal
When we structure a vehicle, the map of the investors matters as much as the map of the assets. A single club deal can gather tax residents of four countries: each will bear, on their share, the treatment of their own treaty with the asset's country. The vehicle does not equalise those situations — it must simply degrade none of them: avoid an intermediate structure costing the benefit of a treaty, document the withholdings suffered so each investor can claim their credit, and anticipate local filing obligations.
The documentary discipline
A treaty never applies automatically: it must be claimed. Tax residence certificates, source-country forms, beneficial-owner attestations — treaty mechanics are file mechanics. It is unglamorous work whose absence is paid in withholdings lost for good. In our vehicles, that work is part of routine administration: every international distribution leaves with its file.