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Non-discrimination clause in tax treaties – Select issues and recent developments

Non-discrimination clause in tax treaties – Select issues and recent developments

Discrimination means unequal treatment in similar and comparable situations. Article 24 of the Model Tax Convention (‘MTC’) deals with Nondiscrimination and provides that the tax provision should not provide for differential treatment to the non-residents in similar situations. Hence, Article 24 of the MTC is a special rule providing for avoidance of discrimination against nationals or residents of another contracting state. Non-discrimination obligations of Article 24 apply only if nationals or residents of two States are comparably situated. In all, what Article 24 holds is that similar situations should not be treated differently, unless there is a justification to do it. Differential treatment constitutes no discrimination when it is objectively justified Ruckdescel v. hauptzollamy hamburg –St.Annen 1979 2 C.M.L R 445. For example – for Nondiscrimination article to apply, they should either carry on same activities or be in the same circumstances. The essence of non-discrimination article is to prevent unfair taxation as distinct from preventing double taxation……………….

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