Fiscal Treaty: Established International Agreement

Fiscal Treaty: Established International Agreement

Introduction

A treaty is an agreement between sovereign states that applies to all countries and in turn it is established that “treated’ must be understood as an international agreement established. Fiscal treaties are often called ‘treaties’ or ‘conventions’. As noted in article 2 of the Vienna Convention, it does not matter its name, it is not important, bilateral tax treaties give rights and impose obligations, applicable to two contracting states, but not third parties such as taxpayers.

However, fiscal treaties are clearly designed to benefit taxpayers from contracting states. That the treaty really does depend on the internal legislation of each country. In some countries, treaties apply automatically: that is, once the treaty is concluded, it grants rights to the residents of the contracting states. In other states, it is necessary to take some other measures (for example, the provisions of the treaty must be established in national legislation) before benefits are granted to the residents of the contracting states under the treaty.

International double taxation

Most tax treaties are bilateral. There are very few multilateral income tax treaties (for example, the multilateral mutual assistance agreement), although tax experts have been promoting the possibility of a multilateral treaty for many years, and the treaty is currently on the plan of the plan. The OECD opposes the erosion of the tax base and the transfer of benefits, the exact scope of the multilateral treaty is not clear.

These non -tax treaties include air transport agreements and trade and investment treaties, such as those applicable to WTO. These agreements usually include exceptions to indicate any property tax problem, income will only be processed according to income tax treaties between countries.

One of the important recent developments is the exchange of fiscal information (AII). These agreements are usually signed between countries with high taxes and countries with low or null taxes otherwise, they will not have a fiscal treaty. In general terms, these international investment agreements require that countries exchange information with the same basis as the regulations or without tax exchange information Article 26 of the United Nations model convention and the OECD.

For a country to decide to enter negotiations to celebrate a tax treaty with other countries, it will take into account many factors, the most important of which is the level of commerce and investment between the two countries.

Once countries decide to negotiate, they will exchange model agreements (if there is no model agreement, the latest model), and organize face -to -face negotiation. Treaties are usually negotiated in two rounds, one by country, which double taxation could cause investments and is an impediment to foreign trade.

In the first round of negotiations, the negotiating team will agree on the texts, which are usually one of the national model treaties that will be the basis of negotiations. After the two parties present the internal tax system, the negotiation will proceed one by a. Aspects of the text that did not reach an agreement are generally placed in square discussions. The aspects of the text that did not reach an agreement are usually placed in square brackets for subsequent discussion. Once an agreement is reached on the drafting of the agreement, it will be executed by the parties. 

Once the agreement has been reached, the signing of the treaty by an authorized official will be organized (generally an ambassador or government official)). After signing, each country must ratify the treaty according to its own procedure. The treaty is generally concluded when countries exchange ratifications. The treaty enters into force in accordance with the specific provisions of the treaty.