Article by: Jansen van Rensburg
This article explored 4 interpretational issues that remain with regard to the application and interpretation of general renvoi clauses in Double Taxation Agreements (DTA’s) and how South African courts have dealt with these issues. The general renvoi clause in DTA’s is based on article 3(2) of the Model Tax Convention on Income and on Capital of the Organisation for Economic Co-operation and Development. This article provide that an undefined term in a DTA shall have the meaning that it has in the domestic law of the contracting state applying the DTA unless the context requires otherwise. The 4 issues are as follows:
- The ambulatory verus static approach: In situations where the meaning in the domestic law changed after the DTA had been concluded, the issue arises as to which domestic meaning must be taken into account under this general renvoi clause: the meaning that existed when the DTA was concluded (a static approach), or the meaning that existed when the DTA was applied (an ambulatory approach)?
- The use of a different expression in the domestic law – if an expression other than the treaty term is used in the domestic (tax) law, can the meaning of that expression in the domestic law be taken into account for the purposes of the general renvoi clause?
- The use of the deeming provisions in domestic law – if an expression other than the treaty term is used in the domestic (tax) law, can the meaning of that expression in the domestic law be taken into account for the purposes of the general renvoi clause?
- The domestic meaning as a “last resort” or as the “leading principle”