Tax Treaty Case Law around the Globe 2022

10.1. Introduction

This case presents an interesting question regarding the somewhat less discussed interaction between the provisions of tax treaties and the domestic procedural rules that implement them. In general, tax treaties refrain from prescribing procedural implementation rules, leaving them as a matter of convention for the domestic laws of the treaty partners. These are bound by the object and purpose of the treaty provisions and the general dictates of the Vienna Convention on the Law of Treaties (1969) (VCLT), most importantly the requirement to apply treaties in good faith.

Adams Challenge (UK) Limited v. Commissioner of Internal Revenue involved several pieces of litigation. This chapter discusses only the question whether a US domestic provision that denies deductions and credits to foreign corporations who do not file timely (generously interpreted as discussed below) tax returns violates the business profits and non-discrimination provisions of the United Kingdom-United States Income Tax Treaty (“the Treaty”) (1975). The implications of the principle established by the case go beyond the specific treaty since there is nothing unique in that treaty that would be ...