Tax treaties are negotiated at the International Economic Discussion and Negotiation Conference (IEDNC) of GATT and other multilateral and regional treaties. The IEDNC was called into session in August 1992 in Geneva to address the issue of multilateral administration and enforcement of tax treaties. The IEDNC made it a condition of signing a GATT treaty to be bound by the obligations of the Vienna Convention for the Protection of Performances Artists, Entertainment Producers and Other Creative People. Tax treaties are negotiated by the U.S. Department of State under the authority of the Secretary of Treasury.
U.S. tax treaties are bilateral treaties which are negotiated bilaterally between the United States and a foreign nation, and provide a mechanism for the enforcement of taxes levied against U.S. persons and assets. The U.S. tax treaties negotiated with countries including most of the nations of the European Union include reciprocal tax concessions and most of the GATT tax treaties include tax information sharing, dispute resolution and tax withholding procedures. The tax treaties typically provide that the domestic person, as between U.S. and foreign tax jurisdictions, has the right of appeal to a third tax jurisdiction, most commonly to the U.S. Foreign Taxation Service, whose decisions are subject to review by the U.S.
Dispute resolution under tax treaties between Israel and foreign countries. It may be that the parties are not permitted to challenge each other’s tax positions. However, this provision is unlikely to be invoked. The Tax Treaty will not be enforced in Israel where either party cannot or will not enforce its rights under the Treaty. Under Israeli law, taxpayers are free to use the tax advantage provisions. The provision of the Tax Treaty is also inapplicable where the taxpayer is subject to multiple national tax statutes. Under Israeli tax law, a taxpayer must have a single taxation authority for a single taxable period in order to maintain his/her right to benefit from tax treaty benefits. Under Israeli law, if there is a loss in relation to a certain income, the loss may be shared proportionally by the parties contributing the income, so that each party will pay only his/her proportionate share. The parties may enter into a settlement of the respective tax liabilities and claims, which could take place pursuant to an Agreement on International Settlement of Tax Questions.
In tax matters, foreign law is applicable, as in international law. In the specific area of dispute resolution, under Israel’s civil law system, where each party is deemed to have equal rights, each party has a right to seek a remedy from the courts. However, under Israeli law, if the parties have settled the tax dispute prior to its going to the courts, the courts will not overturn such settlements. If the parties are unable to agree on the terms of settlement, the dispute will be determined by the courts.
Israel and many foreign countries use standard or similar tax treaties or agreements. According to these agreements, a taxpayer who is subject to taxation by one of the parties may challenge the tax status, amount or classification of a tax assessed by the other party. According to the treaties, in the event of any disagreement, a taxpayer may seek judicial review by the relevant tax tribunal, which could be Israel’s Supreme Tax Tribunal or the Court of Appeals of Hong Kong, the Tax Appeals Tribunal of the United States, or the United Kingdom’s Tax Tribunal.
The applicable treaties, statutes and/or regulations of Israel and the above listed countries in question, as well as provisions of Israel’s civil law concerning tax issues, the tax rates and the rates for payment of tax to the relevant entity or authorities, and applicable regulations relating to tax enforcement and other matters will be applied to determine a taxpayer’s tax position (whether to pay the amount, not to pay the amount, or not to pay anything). In addition to the tax treaties, the taxpayer should be mindful of any applicable tax treaties and statutes adopted by other countries. These apply generally to individuals as well as companies and other entities subject to tax in those other countries.
The laws, regulations, tax treaties and agreements mentioned in this section shall not apply to a taxpayer’s claims with respect to a tax determination regarding a specific tax return.
For more details about how professional tax resolutions could help you with your tax debts, call (888)489-4889 for a free consultation today.