Tax Treaty Case Law around the Globe 2019

S. 601. Introduction

In order to have access to a tax treaty, it is generally essential that a person qualifies as a resident of one or both of the contracting states. If a person is a resident of both contracting states, this situation creates problems. According to the commonly used systems, a state taxes its residents on their worldwide income. If a person is a resident of two or more states, two or more states may tax this person on his worldwide income. If his income is positive, this leads to double taxation; if it is negative, it may lead to a double dip. Neither outcome is desirable, because it disturbs the level playing field for competitors as far as the relevant income producing activity is concerned. Tax treaties try to enhance the level playing field by means of creating a kind of internal market, similar to but not at a level comparable with, for example, the internal market of the European Union. Nevertheless, the essential aims of tax treaties and the EU’s internal market law are closely related. Both aim at removing obstacles to the exchange of goods and services and movements of capital, technology and persons in order to contribute to the development of economic relati...