Developments of article 4 of the OECD Model Tax Convention on income and on capital : their impact on the practical interpretation and application of double taxation treaties

Abstract

The purpose of this research is to demonstrate what effect the Model Convention and the Commentary, together with changes thereto, has on the interpretation and application of existing double taxation treaties and the role of the Commentary in the interpretation of tax treaties. Furthermore, it will look into the status of the Commentary in terms of Public International Law and therefore the possibility, or not, of classifying the Commentary as Customary International Law or as part of the 'context' of the Model Convention for the purposes of the Vienna Convention on the Law of Treaties. Moreover, regard must be given to the binding nature or otherwise of the Commentary taking into account the general rules of law as well as the expressed non-binding nature of the Commentary as held in the Model Convention. The general rule of residence in Article 4 of the Model Convention finds its interpretation in the relevant provisions of the Commentary which extensively interpret Article 4 and to which an update was effected in 2008. Therefore, besides presenting an analysis of the general concept of residence both under the Model Convention and under Maltese law, the purpose and effect of the 2008 changes to the Commentary on Article 4 will also be tackled together with the changes made to the interpretation of the status of dual-resident companies. The influence of the 2008 changes on the interpretation of Article 4 of the Model Convention will also be dealt with from a Maltese perspective thereby considering the impact of such changes from a Malta tax compliance point of view when a dual-resident company fails to qualify as a resident of Malta for treaty purposes, regard being given to the effect of the Model Convention and its Commentary on Malta, as an OECD non-Member