Tax treaty interpretation in the case law of the Spanish Supreme Court

Abstract

The Double Taxation Conventions on income and capital (hereinafter, DTC) are international treaties governing the fiscal relations between two states, distributing the tax power between them, with the aim to eliminate international double taxation, prevent tax evasion, guarantee legal certainty to taxpayers and States and ensure a uniform application of fiscal legislation in both.

The rules of interpretation of these international treaties are in the Vienna Convention on the Law of Treaties (hereinafter VCLT) on May 23, 1969 and in the domestic regulations on such topic. From this derives the need to frame the provisions of the Convention with the OECD Model Convention and its Comments and with the internal legislation, in order to explain their legal theoretical support and the way of DTC's interpretation.

However, the constant references to domestic tax law for DTC's application lead that to the concepts used in them are interpreted differently in the Contracting States, which is one of the reasons for double taxation or double non- taxation. Although rules of interpretation of the VCLT and the OECD MC try to establish uniform principles to solve these problems, the reality shows us that there is a wide disparity of interpretive criteria and application of national laws, leading to increasing litigation and lack of legal certainty. The paper discusses the application of interpretative criteria in the framework of the OECD MC done by the Spanish Supreme Court, as interpreter of the lawfulness of the legislation. We analyze the judgments of the Supreme Court in the last ten years and provide with its doctrine and a critical overview of such jurisprudence pronounced on the basis of the OECD MC's Commentaries and other documents of that institution.