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Interpretation of Treaties – Monist or Dualistic View

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June 7, 2021

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3 mins read

There are two views on the Interpretation of Tax Treaties. Different countries may follow either of these rules for interpretation of tax treaties. The classification of interpretation into these rules depends on the following factors : –

  • Whether DTAA overrides domestic law ?
  • Whether International Law and National Law are part of the same system of Law ?

Let us now discuss the two views on interpretation of tax treaties : –

MONIST VIEW  (followed by India as well)

Under this view on interpretation, International Law and National Law are considered as part of the same system of Law, and DTAA overrides domestic law.

Some of the countries which follow  Monist View are    Argentina, It/aly, India, Netherlands, Belgium, Brazil.

International Taxation Services

DUALISTIC VIEW

Under this view on interpretation, International Law and National Law are separate systems, and DTAA becomes part of the National Legal system by specific incorporation / legislation. In case of Dualistic View, DTAAs may be made subject to provisions of the National Law.

Some of the countries which follow Dualist view are Australia, Austria, Norway, Sri Lanka, Germany, UK. Recently , Federal Court of Australia, in the case of Tech Mahindra , has held that payments received by an Indian company,  from its Australian  clients   will be taxed in Australia as   ‘royalty’  on the premise that such income can be taxed under the Treaty, even though such payments cannot be taxed under local Australian laws.

For any queries, please write them in the Comment Section or Talk to our tax expert

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

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