Interpretation and Application of Tax Treaties

Paper by CA. Karnik Gulati

What is a tax treaty?

A tax treaty is a contract between two or more sovereign governments. Tax treaties are international agreements under public international law. The main objective of tax treaties is avoidance of double taxation and prevention of fiscal evasion.

Treaty negotiation process

It may take several years from the initiation of negotiations between respective countries to the date when a tax treaty actually enters into force. Many a times treaties progress to the final stages, but never comes into force. This is perhaps because, meanwhile the treaty is negotiated, the domestic tax laws of those countries have changed significantly and the countries are forced to ‘go back to the drawing board’.

To show you the glimpse of the key stages involved in process of treaty negotiation, we have fleetingly presented the same below:

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