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Summary Learning Goals International Business Taxation
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A summary of the course. This summary written along the learning goals which are given in the syllabus. My exam grade was an 8.0.
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ContentsWeek 1...................................................................................................................................... 2
Summary.............................................................................................................................2
Week 2...................................................................................................................................... 4
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Week 3...................................................................................................................................... 7
Summary.............................................................................................................................7
Week 4.................................................................................................................................... 12
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Week 5.................................................................................................................................... 15
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Week 6.................................................................................................................................... 18
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Week 7.................................................................................................................................... 20
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,Week 1
Summary
Understand the role of the Vienna Convention on the Law of Treaties in tax treaty law;
The main rules of interpretation for international treaties are put down in the Vienna
Convention on the Law of Treaties. This is binding on all states, not only the signing states,
as the provisions in the treaty are forming part of international customary law. Therefore Art.
31 and 32 should be applied to all tax treaties.
Identify and contrast the means of interpretation provided under the Vienna Convention;
Articles 31 and 32 distinguish between two means of interpretation. According to Art. 31 of
the VCLT the treaty should be interpreted by looking at the treaty itself, by using good faith,
by the object and purpose of the treaty and the ordinary meaning. On top of that, one should
also keep an eye on the context of the treaty. Based on paragraph 2 of the same article, one
should also read the provision in correspondence with the other legally binding agreements
that have been concluded in connection with the treaty. All these means to use for
interpretation fall under Art. 31. These are the primary means of interpretation.
Next to the primary means of interpretation one might in some cases also use supplementary
means of interpretation. Supplementary means of interpretation are in principle documents
that are not legally binding to the contracting parties. It is important that in order for
documents to fall under ‘the preparatory work of the treaty and the circumstances of its
conclusion’ the work should be concluded before the conclusion of the treaty and with the
aim of concluding the treaties, by the contracting parties. The OECD model is written by the
Fiscal Committee and therefore falls under the scope of the other supplementary means.
Analyse the relationship between primary and supplementary means of interpretation;
Under Art. 31 the meaning of a provision should be interpreted by using the legally binding
instruments that are in connection with the treaty that follows from the provision. If this leads
to an unambiguous (clear) meaning, the supplementary means can only be used to confirm
the clear interpretation of the provision.
If the instruments that can be used according to Art. 31 do not lead to an unambiguous
interpretation or leads to a result which is manifestly absurd or unreasonable one may use
supplementary means of interpretation (Art. 32) to determine the meaning of the provision.
One might argue that when a provision is interpreted according to the means outlined in
Article 31 of the VCLT, and the meaning appears clear, but differs from the meaning in the
OECD Commentary, the interpretation is not clear after all. In such cases, the OECD
Commentary should be considered to determine the meaning of the term.
Evaluate the legal relevance of the OECD Commentary for tax treaty interpretation;
As the OECD Commentary is not legally binding to all Member States and it is also not
concluded in the course of concluding a treaty, the Commentary can only fall in the scope of
the ‘other supplementary means’. Therefore the relevance would be less, as the means of
interpretation that follow from Art. 31 VCLT are usually more relevant than the supplementary
means that follow from Art. 32 VCLT.
Most important of the different supplementary elements of interpretation are the ones that
provide direct information of the common intention of the treaty parties regarding the treaty’s
, substance. Their relevance therefore depends on how well they can show the contracting
parties intention. With the OECD, there are two main reasons that this cannot be well
established. Firstly, the Commentaries are not written by the parties themselves, but by the
Fiscal Committee. Secondly, the Commentaries are not drafted for the purposes of any
(specific) tax treaty.
The ICJ accepted that also explanatory materials, which are not originally generated for the
purposes of the specific treaty but for another instrument, can represent the mutual
understanding of the parties when they have copied the provisions of that other instrument.
For the relevance it is also important to look at all the different versions of the OECD models,
as they are being updated regularly. Two different approaches can be distinguished.
According to the static approach, only OECD commentaries can be used which were already
published when the treaty was concluded. Proponents of this approach will use the argument
of legal certainty, which is a valid point. The OECD perspective, however, is the dynamic
approach. According to them the later versions should be applicable as well. They follow this
approach as they state that the changes are made to the previous versions, to clarify what
was already in the Commentary. So in essence, nothing changes according to them.
Usually the static approach is applied. The dynamic approach shall only be applied when
there is evidence that the parties intended the normative content to evolve over time.
Define reservations and observations and explain their role in treaty interpretation.
A reservation is a significant deviation from the OECD model. It is a right to opt out of a
provision when concluding tax treaties. It is however no exclusive opt out, as during
negotiations one might compromise on this provision.
An observation is made when a Member State makes clear that it has a different
interpretation on the provision or term in the Commentary.
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