unctad.org | TAXATION
Book Information
UNCTAD Series on Issues in International Investment Agreements
Full Report ( 111 Pages, 335.0 KB )


The paramount issue underlying all international tax considerations is how the revenue from taxes imposed on income earned by the entities of a transnational corporate system is allocated among countries. The resolution of this issue is the main purpose of international taxation agreements, which seek, among other things, to set out detailed allocation rules for different categories of income. While international tax agreements deal foremost with the elimination of double taxation, they also serve other purposes such as the provision of non-discrimination rules, the prevention of tax evasion, arbitration and conflict resolution.

The process of globalization, including growing transnational investment and trade, has increased the potential for conflict between tax jurisdictions. At the heart of jurisdictional conflict lies the issue of the jurisdiction to tax. There are no restrictions under international law to a legislative jurisdiction to impose and collect taxes. In most countries, the jurisdiction to tax is based on the domestic legislative process, which is an expression of national sovereignty. States apply their jurisdiction to tax, based on varying combinations of income source and residence principles. This, together with mismatches in definition, accounting and income recognition rules, may result in double taxation or, in some cases, in a jurisdictional vacuum. A jurisdictional conflict arises when a taxable event falls under the jurisdiction of two or more sovereign powers. These are generally the source country and the country of residence. Jurisdictional conflicts can be, and often are, relieved unilaterally under both international investment agreements (IIAs) and double tax treaties (DTTs). The bulk of such arrangements are represented by bilateral agreements dealing exclusively with tax matters.


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