Other Income in Tax Treaty Practice: the Normative Profiles Used by Contracting States

Abstract

The aim of this contribution is to identify the normative profiles used by contracting states when designing tax treaty provisions aimed at allocating taxing rights to income not dealt with by any other allocation. With this contribution, the author seeks to allow a better understanding of the current treaty practice in what concerns the such provisions.

A normative profile is not more than a model or archetype of a treaty provision designed based on an inductive reasoning (based on treaty observation). Each profile expresses a specific tax policy option, leading to a distinctive tax treatment of the (other) income falling within its scope. A normative profile gathers treaty provisions with different wordings insofar as their underlying policy goal and tax consequences are similar. In fact, treaty practice is rich in deviations that do not represent a different policy option (or interpretative outcome).

The identification of all these normative profiles, which is performed for the first time in this contribution (at least in what concerns “other income”), also aims at facilitating future research, providing a comprehensive analytical structure that researchers may namely for further statistical analysis on the occurrence of this provisions in treaty practice. It also facilitates the efforts of designing provisions to be included in bilateral and multilateral instruments.

Keywords: European Union, other income, tax treaties, bilateral instruments, multilateral instruments

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