In the present case, the Netherlands reads the Protocol in accordance with the principle of common interpretation in order to ensure consistency and fair distribution of tax assets between countries. The Court therefore rejected the tax argument that Slovenia, Lithuania and Colombia became members of the OECD not only after the entry into force of the tax convention, but also after the entry into force of their own tax convention and that the reduced rate of withholding tax on participating dividends could not be applied to taxpayers. The use of the term « is » in the phrase « which is a member of the OECD » in the most-favoured-nation clause requires that countries be members of the OECD when the withholding tax is triggered in India and not necessarily at the time of signing the tax treaty. Income tax is used in most countries of the world. Tax systems vary considerably and can be progressive, proportional or regressive, depending on the type of tax. Comparing tax rates around the world is a difficult and somewhat subjective undertaking. In most countries, tax laws are extremely complex and the tax burden is different for different groups in each country and subnational entity. Of course, the services provided by governments against taxes also vary, making comparisons all the more difficult. Taxes as an issue are very complex. However, tax legislation is theoretically sound and practically complicated to implement. As a result, many companies hire experts or stumble in lengthy legal disputes due to disagreements. Countries with a housing tax system generally allow deductions or credits for tax that residents already pay to other countries on their foreign income. Many countries also sign tax treaties among themselves to eliminate or reduce double taxation.
As regards the subject matter of the taxation, the following should be imposed: in another case, Dr Rajnikant Bhatt, Thane V Assessee, A, resided in the United Arab Emirates, therefore, according to the COMMISSION, all income which did not fall within the scope of Article 22 of the Treaty, which deals with the effects of the contract on income other than that referred to in the above-mentioned Articles, taxable. In the present case, given that the shipping business income transaction is not taxed in both India and the United Arab Emirates, which results from shipping transactions where the United Arab Emirates does not have local corporate tax, it would be useful to ascertain whether such a transaction can be refused by tax treaties applying the MI. However, the contract purchase argument is diluted as the taxpayer has been present in the UAE for some time, with the revenue from the shipping operation coming from a large number of customers and not focusing solely on Indian operations. The Court pointed out that the literal wording of the most-favoured-nation clause in the context of the tax treaty uses clear conditions under which any subsequent tax agreement concluded with the OECD member at any given time allows for the benefit of the most-favoured-nation clause. The Court held that the « common interpretation » rule is used to allocate taxes fairly and equally between the two countries, and that the courts must ensure that the tax treaty is applied effectively and fairly in order to ensure a uniform interpretation of the provisions by the revenues and courts of the respective countries. However, the common rule of interpretation should be applied with caution and caution, as the point of view expressed is unique and/or personal to the income or to a court. In addition, the interpretation of the tax convention is exempt from the technical rules governing the interpretation of national/local law. The main function of a tax treaty is to promote commercial relations and the equitable distribution of tax revenues in relation to income taxed both in the territory of origin and in the territory of the territory of residence.
Reference is made to Article 6 of the Multilateral Instrument (MLI), which modifies the scope of tax treaty claims in situations where the taxpayer`s primary objective is to benefit from the tax treaty in order to create opportunities for non-taxation or tax reduction through tax evasion or avoidance, including through agreements to obtain tax exemptions for the indirect benefit of Preserving Residents from Non-Residents. Consequently, in case of acceptance, the restricted scope or reduced rate of withholding tax agreed by the legal systems applies in accordance with the tax convention which enters into force from the date of entry into force of the tax treaty with that OECD Member State. In 1913, the Sixteenth Amendment to the United States Constitution made income tax an integral part of the U.S. tax system. In fiscal year 1918, annual internal revenues surpassed the billion mark for the first time, reaching $5.4 billion in 1920. [17] The amount of income-related income varied widely, ranging from 1% in the early days of U.S. income tax to tax rates of more than 90% during World War 2. Since it is a public limited company in the United Arab Emirates (UAE) that operates a shipping company with control and administration in the United Arab Emirates, the taxpayer is considered a resident tax taxpayer in accordance with Article 4 of the Tax Convention between India and the United Arab Emirates (Tax Treaties) and has had its registered office and business in the United Arab Emirates since 2000, which would give him the right to: benefit from the advantages provided for in Article 8 of the Tax Convention.
In the United Kingdom of Great Britain and Ireland, Sir Robert Peel`s income tax was reintroduced by the Income Tax Act 1842. Peel had opposed income tax as a Conservative in the general election of 1841, but a growing budget deficit required a new source of funding. The new income tax, based on Addington`s model, was levied on income above £150 (equivalent to £14,225 in 2019).[7] Although this measure was initially intended to be temporary, it quickly became an integral part of the UK tax system. The taxpayer may claim the tax advantage provided for in Article 8(1) of the Tax Convention, which grants the company`s profits from its operation of vessels in international traffic only in the United Arab Emirates as taxable persons and thus grants a tax exemption for that income in India. Countries do not necessarily use the same tax regime for individuals and businesses. For example, France uses a housing system for individuals, but a territorial system for businesses[49], while Singapore does the opposite[50], and Brunei taxes corporate income but not personal income. [51] The Court held that the revenue claim that the advantageous provisions of the tax treaty signed after the entry into force of the tax treaty were not applicable to the recipient of dividend income referred to in Article 10 of the tax treaty with the OECD member State concerned was misunderstood and contrary to the literal meaning of the Protocol annexed to the tax treaty. The taxpayer is a company registered in the United Arab Emirates that deals with services such as ship chartering, freight forwarding, sea freight services and shipping agent, with control and management exercised in the United Arab Emirates. The taxpayer charters ships for the transport of goods and containers in international waters, including to ports in India and around the world. The taxpayer held a Tax Resident Certificate (TRC) and considered his company`s profits from maritime operations in international traffic from the United Arab Emirates or India to be taxable only in the United Arab Emirates and not in India, applying the benefit provided for in Article 8 of the Tax Convention. It is important to note that Colombia became a member of the OECD on 28 April 2020, so the reduced rate of 5% under the Indo-Colombian tax treaty (unlike Slovenia/Lithuania) is not subject to the condition of a minimum stake in the company declaring the dividend.
It is important to note that Article 8 of the Multilateral Instrument (MLI) applies to the Indo-Slovenian Tax Convention, which imposes an additional condition of a minimum holding period of 365 days and Lithuania has reserved its right to Article 8 of the MLI. Since there is no requirement for minimal participation and MDI effects, the Indo-Colombian tax treaty remains advantageous in the context of the most-favoured-nation analysis. The issue of tax liability in a country in the context of residency control for companies, particularly in the context of administration and control, is a factual decision that is dealt with by many courts. In this case, the court provides valid guidelines for the acceptance or rejection of the principle of control in the use of contractual benefits not only because the owner or staff of the key administration is located in another jurisdiction. The taxpayers applied to the Court of Justice for recognition of the Decree of the Kingdom of the Netherlands in which they argued that the benefit of the most-favoured-nation clause was automatic and effective once India had concluded an advantageous tax agreement with an OECD Member State, without the need to expressly communicate the right to an economic tax rate on dividend income. .