International trade has existed from the most ancient civilization of the world
like Harappan, Mesopotamia, Egyptian and Roman civilizations. However, the
volume of international trade was not so large in those days as it is today.
After World War II, not only international trade but finance and investment also
increased. With the gradual removal of barriers to international trade through
GATT (General Agreement on Tariffs and Trade) and WTO (World Trade Organization).
With the formation of IMF (International Monetary Fund) and Bank for
International Settlements, barriers in finance vanished. Regarding investment,
the main multilateral push is yet to come. The negotiations on Multilateral
Agreement on Investment were launched by governments at the annual meeting of
the OECD Council in May 1995 but never concluded.
It is a corollary of this growth in international transactions that the
significance of international tax laws has increased in each country's legal
system. As restrictions in other areas are significantly reduced or removed,
taxation is brought into focus increasingly.
This guide will focus on international tax law from a worldwide standpoint, but
it will also provide information and resources for anyone interested in
international taxation. This research guide will discuss tax treaties, customary
international law, and basic legal principles. Secondary sources will be covered
as well, including selected treatises, practice manuals, periodicals, internet
sources and research aids. There are many sources involved in international tax
law. There are two types of sources primary and secondary sources.
- Vienna Convention on the Law of Treaties
It is an international treaty which regulates treaties between states.[i] It is
also called a treaty on 'treaties'. It establishes comprehensive rules,
guidelines and procedures for how treaties are defined, drafted, amended and
generally operated.[ii] This convention was ratified on May 23, 1969, and it
became effective on January 27, 1980.The Vienna Convention on the Law of
Treaties applies to the treaties between states within an intergovernmental
It is significant because it establishes the minimum
requirements for all treaties, including tax treaties. It has been ratified by
116 countries (as of January 2018) and has 15 signatories that have not yet
ratified. The number of United Nations state members that have neither ratified
nor signed the convention is 66.
The United States of America (despite being a
signatory) is one of the countries that have yet to ratify the convention. Even
though the United States Senate has never ratified the Vienna Convention, many
federal and state appellate courts believe the treaty interpretation
requirements to be obligatory.
- Model Tax Conventions
These serve as a starting point for international tax treaty negotiations. Three
fundamental model conventions should be understood: the Model Tax Convention of
the Organization for Economic Cooperation and Development (OECD); the Model Tax
Convention of the United States; Model Tax Convention of the United Nations.
main difference between the UN model and the OECD model is that the UN model
provides taxation of only those profits of an enterprise which are not directly
attributable to a permanent establishment of an enterprise but are related to
the same kind of goods sold or same kind of business activity as the permanent.
This is also called the "limited force of attraction rule" and has been
criticized by many countries for disincentivising businesses and burdening
taxpayers. These three models are not legally binding, but they are intended to
simplify tax treaty discussions and prevent issues for countries with
- Tax Treaties
These are bilateral agreements between two countries for resolving issues that
involve double taxation of incomes (active or passive) of their respective
citizens.[iv]Tax treaties are the most authoritative source of international tax
law, although their authority is based on how each country interprets the
treaty's wording regarding its domestic laws. These are in-depth resources that
provide deep analysis, detailed explanation and interpretation of an area of the
Usually, tax treaties are written by scholars in the field. These also
provide many citations to the primary law. Some countries consider treaties to
be automatically binding, whereas others require specific legislative procedures
and ratification before the treaty's contents become law.
Tax treaties are
regarded as "the country's supreme law" in the United States. If there is a
competing statute, the treaty's authority is determined by whether the statute
was passed before or after the treaty. Treaties that are signed later in time
have more weight than those that are signed earlier.
- Customary International Law
It is an aspect of international law which involves the principles of custom.
Custom is also considered by the International Court of Justice, the United
Nations, and jurists along with general principles of law and treaties. The
forms of evidence of customary international law, as listed by International Law
Commission, in 1950, are treaties, national legislation, decisions of national
and international courts, diplomatic correspondence, opinions of national legal
advisors and practice of international organizations.[v]
The UNGA (United
Nations General Assembly) has also welcomed the Conclusions on Identification
of Customary International Law with commentaries. For issues not covered by tax
treaties, customary international law can help by examining "generally uniform
and consistent state practice regarding a certain matter" to see if a particular
action was performed because of a legal obligation or belief based on
international law. Customary international law will examine historical acts made
by nations on tax-related matters, and proof of this can be found in state
practice sources, digests, and yearbooks.
- General Principles of Law
These are basic rules whose content is very general and abstract. General
principles of law have not been 'posited' according to the formal sources of law
unlike other types of rules (enacted laws or agreements). These are included in
the list of sources of international law in article 38 of the International
Court of Justice statute as "general principles of law recognized by civilized
General principles of law can assist attorneys who are dealing with
difficulties with little or no legal precedent in matters that cannot be
addressed by treaties or customary international law. These are fundamental
legal notions that all nations must adhere to, and they deal with issues that
are difficult to manage through treaties.
The International Court of Justice's
Statute, which requires the court to consider "the general principles of law
acknowledged by civilized nations" in deciding cases after reviewing treaties
and customary international law, has given general principles of law credence.
Case law and scholarly works can be used to create general legal concepts.
Several secondary sources focus on international tax law, and these are
essential because they give critical analysis for individuals who practise or
research in this field.
- Treatises/ Practice Guide
Mainly there are 3 types of treaties are there:
Model tax treaties, multilateral tax treaties, and bilateral tax treaties.
Few multilateral tax treatises are also there. The list of following tax
treatises is given here but the list the is not exhaustive:
Bilateral treaties are usually divided into two categories in the United States:
- Vienna Convention of the law of treatises.
- Convention on Mutual Administrative Assistance in Tax Matters
- Protocol Amending the Convention on Mutual Assistance in Tax Matters.
- Multilateral Convention to Implement Tax treaty Related Measures to
Prevent BEPS (MLI).
bilateral treaties to which the United States is a party and bilateral treaties
to which the United States is not a party.
The IR'S website has a list of bilateral treaties involving the United States.
These may be found on the websites of foreign legislatures or in international
tax law databases.
- OECD Model Tax Convention
- US Model Income Tax Convention
- UN Model Tax Convention
- News / Current Awareness
- International Tax Monitor. Washington: Bloomberg BNA,2001
- Tax Notes International. Arlington, VA: Tax Analysts,1989
- Worldwide Tax Daily. Arlington, VA: Tax Analysts, 1998
- Selected Journals and Periodicals
- Berkeley Journal of International Law.
Berkeley: University of California Press, 1996- (previously International Tax
and Business Lawyer, 1983-1996).
- Journal of Taxation of Global Transactions. Chicago: Commerce Clearing
House (CCH), 2001-2006 (merged with International Tax Journal starting 2007).
Tax Management International Journal. Washington, DC: Bureau of National
Affairs. Tax Management Inc., 1972
- World Tax Journal. Amsterdam: IBFD, 2009.
- Bulletin for International Taxation. Amsterdam: IBFD, 2006
- International Tax Journal.Greenvale, NY: Panel Publishers, 1974
- IBFD International Tax Glossary, 7th ed. Rogers-Glabush, Julie, ed.
Amsterdam, Netherlands: IBFD, 2015.
- Westin, Richard. Tax Dictionary. Valhalla, NY: Thomson Reuters/WG&L, 2014
(available on Thomson Reuters Checkpoint).
- Smith, Robert Sellers. West's Tax Law Dictionary. St. Paul, MN:
Thomson/West, 2018 (available on Westlaw).
- Online Research
It is essential for research on International Taxation, especially for those who
need to access model tax conventions and tax treaties. A lot of free databases
as well as some databases on a subscription basis are provided by various
foreign, international agencies, and private institutions which are helpful in
the research of international taxation laws.
European Union ( EUROPA)
Organisation for Economic Co-operation and Development (OECD)
World Trade Organisation(WTO)
- Bloomberg Law
- International Bureau of Fiscal Documentation (IBFD)
- Lexis Advance
- West Law
- Tax Sutra
The two main categories with which International Tax Laws deal are:
First, is the Taxation of persons who are not the citizens of a country but
work, enter into transactions or have property or income in the country.
Second, taxation of persons who belong to a country but work enter into
transactions or have property or income outside that country. It is the term
'residence' that is used in international taxation to denote the concept of a
person belonging. Similarly, it is the term 'source' is used to denote the
source of a particular income that is inside or outside a country.
These two categories are present in all types and areas of taxation. The
taxation of domestic income of non-residents and the taxation of foreign income
of residents is a major issue.
In both cases, the problem of double taxation is the main issue. More than one
country seeks to tax, without taking into taxation the tax levied in another
country or no country may tax, assuming that another country is levying the tax.
This results in increased opportunities for tax planning (or tax cheating).
Double taxation thus acts as a hurdle to international transactions and nearly
all the countries in the world are agreed on the desirability of removing such
In addition to this, double taxation will create a bias in favour of
international transactions over domestic transactions which leads to loss of the
welfare of the earth as a whole (Not mentioning tax revenues). Unfortunately,
double non-taxation is tolerated by governments (sometimes even encouraged).
Double non-taxation is obviously desired by taxpayers. Developing countries
often argue that due to the removal of international barriers, it is the
developed countries that are getting benefitted.
Therefore many times special
regimes are introduced in international agreements such as a generalised system
of preferences (in which tariff privileges are conferred on developing countries
without being obliged to all GATT members) in the General Agreements on Tariffs
and Trade (GATT) to deal with the concerns of developing countries.
In the income tax field, developing countries offer tax incentives to
international investors to attract capital investments. Tax incentives are also
provided by developing countries to counter the effect of the tax system of
Therefore in the purview of the above problems of double taxation or
non-taxation, a rule-based international taxation order is desired which takes
care of the growing concerns of developing countries and at the same time
increases investment across the globe. The problem of complying with domestic
rules of various countries and providing a level playing field for all the
investors across the world.