Introduction to the Law of Double Taxation Conventions

S. 52. State practice in the conclusion of DTCs

2.1. Conventions in international law

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At the conclusion of a DTC, the two parties to the convention accept an international law obligation. They commit themselves to relinquishing, completely or partially, the imposition of taxes in specific situations. The convention is subject to the rules of public international law.

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The contracting states are free to decide the manner in which they will give up taxing rights. For example, they may change domestic law so that only the transactions set out in the DTC regarding the imposition of taxes remain. Often, however, the conventions are directly applicable as domestic law. In this case, the DTC rules override the otherwise applicable domestic tax rules.

2.2. The importance of model conventions

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Every DTC is negotiated separately. Nevertheless, many of the existing DTCs throughout the world resemble each other. This can be traced to the model tax conventions developed by international organizations. These model tax conventions are usually the starting point for bilateral negotiations. The parties to the convention only need to negotiate those points upon which they wish to deviate from the model tax con...