Interpretation and Application of Double Tax Treaties - A Comparative View on the Theory and Application of the Principle of Common Interpretation and the 'new' interpretation of Art. 23 A/B OECD-MC Exemplified by the Problems of Qualifying Income and Per

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The diverging interpretation and application of double tax treaties with special regard to the classification of income and the existence of a permanent establishment may frequently lead to double (non-)taxation. This result is contrary to the explicit intent of the contracting parties. Even if it leads to double non-taxation, it causes conflicts with internationally accepted principles of taxation and enables the distortion of competition through tax shelter schemes, which may have negative effects on welfare.A number of methods do exist for solving such conflicts of qualification among others the principle of common interpretation and the approach to follow the classification of the source state ("new approach"). However, in practice these methods face reservations in many states, motivated by the fear to lose sovereignty, their complexity and methodological uncertainties. So far scholars only have looked at the methods from a theoretical, case-based or national perspective. The research project aims to explore the founding principles, the application and the suitability of the principle of common interpretation as well as of the new interpretation of Art. 23 A/B OECD-MC to prevent qualification conflicts from a comparative perspective. This comparative study may lead to an enhanced pool of solutions that should be utilized to further develop existing methods in order to improve their international acceptance and their suitability to avoid conflicts.Therefore national positions on the obligation to follow these methods and thus their practical relevance for reducing conflicts of qualification as well as national viewpoints on treaty interpretation will be illustrated and analysed comparatively. States that apply or decline those methods explicitly will form the focus of that study. Aligned with that we conduct a comparative analysis to identify differences in the categorisation and treatment of income from trade and capital gains as well as the different permanent establishment conceptions in multiple jurisdictions and simultaneously the approaches of countries to reduce conflicts of qualification. The analysis aims to explore how far national criteria are able to be harmonised and may lead to a unified treaty interpretation. The focus of the second part of the research project is twofold with income qualification of trade on the one hand and the qualification of agency permanent establishments on the other hand. Both questions are relevant to and exemplified by business models of private equity and venture capital funds.