Special Features of the UN Model Convention

1. S. 452Introductory Remarks

In recent years, economies have increasingly become globalized and integrated. From a tax perspective, these developments create the following conflicting interests: while taxpayers and investors pursue the goal of cutting taxes (seen as costs of doing business) worldwide, countries aim at attracting foreign direct investments while, at the same time, protecting their tax bases in competition with each other. In addition, income arising from cross-border activities may be subject to multiple taxation that is mainly due to the concurrent application of rules provided by diverse domestic systems.

In order to foster cross-border economic relations, the international community has built a set of rules during the last century that have been ‘codified’ in Double Taxation Conventions (DTCs) that aim at facilitating cross-border business activities and attracting investment as well as technology and skills in developing countries. An efficient system of DTCs may thus prevent and avoid international double taxation of the same income. However, when DTCs are in place, taxation not in accordance with the provisions of the treaty and divergent interpretation or applicatio...