Portugal: The Impact of the OECD and the UN Models in the Portuguese DTC's

Abstract

This article provides a comprehensive review of the Portuguese tax treaty network and of its deviations from the OECD and the UN model Convention. It is undisputed that the OECD Model is the archetype that inspires Portuguese tax treaty policy and shapes most of the solutions contained in Portuguese double tax conventions. Nevertheless - and due to a previous underlying understanding of the need to safeguard Portuguese rights as a source state - we still find some provisions that are in line with the UNModel. One important remark should be made, however: it is not unusual to find provisions which, although being clear copies of the UN Model, are not part of Portuguese tax treaty policy but rather are a result of a specific request of the other contracting state. Although there is no such thing as a Portuguese model, it is possible to reconstruct - and we have tried to do here - what would be the ideal Portuguese double tax convention. This ideal is obtained by introducing the typical deviations that were flagged in this chapter into the OECD Model. The assessment of the impact shall also include consideration of the Commentaries. Taking into account the Portuguese reality, it is easy to see their impact in tax treaty practice, both administratively and in judicial dispute settlement. Nevertheless, direct references to the Commentaries are somehow infrequent, which can be explained by the uncertainty of their legal value or of which version should be used to interpret a certain treaty provision. It would be useful - and it would improve legal certainty - if the Commentaries were effectively mentioned whenever a dispute is resolved based on their solutions. It is likely that the fundamentals of Portuguese tax treaty policy will not undergo any major changes in the near future, although there is clearly a trend - which will likely become more pronounced in the future - to come closer to the OECD Model and include deviations only when they are specifically required by the diversity of economic positions of the two contracting states.

Keywords: tax treaty policy, double tax conventions

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24