Understand Make Available Concept

 

The "Make Available Clause" is a concept often found in Double Taxation Avoidance Agreements (DTAAs), also known as tax treaties, between countries. DTAAs are bilateral agreements negotiated between two countries to prevent double taxation of income earned by residents of one country in the other country. These treaties provide rules for allocating taxing rights over different types of income, such as dividends, interest, royalties, and capital gains, to ensure that taxpayers are not subjected to double taxation.

The Make Available Clause is primarily associated with the taxation of certain types of income, such as pensions and social security benefits. It is designed to clarify which country has the right to tax these specific types of income. Here's how it generally works:

1. Primary Right to Tax: The Make Available Clause typically grants the primary right to tax pensions and social security benefits to the country of residence of the recipient. In other words, the country where the individual resides usually has the first claim to tax this income.

2. Secondary Right to Tax: However, the Make Available Clause may also allow the country of source (the country where the income originates) to tax such income but with certain limitations. The key limitation is that the country of source can only tax the income if it is "made available" for taxation in the country of residence.

3. "Made Available" Requirement: The "made available" requirement means that the country of source can only tax the income if the recipient has the option to receive or access the pension or social security benefits in the country of residence. In other words, if the income is not accessible or available in the country of residence, the country of source cannot tax it.

4. Avoiding Double Taxation: The Make Available Clause is crucial in preventing double taxation because it ensures that the income is taxed in either the country of residence or the country of source, but not both. This helps taxpayers avoid being taxed twice on the same income.

5. Country-Specific Provisions: The specific language and provisions of the Make Available Clause may vary from one DTAA to another. Some treaties may have more detailed requirements or exceptions, so it's important to refer to the specific treaty text for precise information.

It's essential for individuals who receive pensions or social security benefits and have connections to multiple countries to review the relevant DTAA between those countries to determine how their income will be taxed and to take advantage of any provisions that can help reduce or eliminate double taxation. Additionally, tax professionals and advisors with expertise in international taxation can provide guidance on navigating these complex tax treaty provisions.