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Updated on July 18, 2023

A protocol, in the context of tax treaties, refers to a signed document that outlines the agreed-upon points between negotiating parties before a final treaty is established. This protocol is a supplementary agreement to an existing tax treaty and serves specific purposes in relation to tax matters. The protocol can be signed and ratified by the parties simultaneously with the tax treaty or at a later stage. Its primary function is to provide additional clarity, implementation, or modification to specific provisions within the treaty.

How is protocol important in tax treaties?

The use and interpretation of protocol in tax treaties is mentioned here.

It serves as an additional agreement to an existing tax treaty, outlining agreed-upon points.
It provides clarity and interpretation of specific provisions within the tax treaty.
It implements or modifies treaty provisions to address emerging tax issues and changing standards.
It is legally binding upon the signatory parties.
It records essential elements such as definitions, taxing rights, dispute resolution, and information exchange.
It improves the effectiveness of the tax treaty.
It reflects the ongoing adaptation of the treaty framework to evolving tax issues.
It allows for the periodic review and adjustment of the treaty.
It signifies a legally binding commitment to the agreed-upon modifications.
It facilitates consistency and cooperation between contracting states in tax matters.