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3.3. Potential Exclusion from Treaty Benefits for Failure to Meet Residence Test

The majority of scholars and the tax authorities consider that all companies and entities that are regarded as tax resident for domestic law purposes should be considered as residents also for tax treaty purposes.

Estonia has added a specific reservation on Article 4(1) OECD Model Tax Convention by reserving the right to include the place of incorporation or a similar criterion. Therefore, Estonia does not follow the OECD’s tie-breaker rule in its tax treaties by giving preference to the ‘place of effective management’ test to resolve companies’ dual residence. Instead, its tax treaties generally provide that, where dual residence occurs, the authorities must endeavor to settle the question by mutual agreement and determine how to apply the tax treaty. In the absence of agreement, a person is not considered as a resident of either State for the purposes of enjoying the benefits under that treaty.