Double Taxation, EU Law, and Incoterms in International Trade

Posted on Jan 26, 2025 in Law

Double Taxation Conventions and Exemption Systems

A double taxation convention, also known as a tax treaty, is an agreement between countries to prevent or mitigate double taxation. It determines which country has the right to tax specific income or assets, eliminates or reduces double taxation through tax credits or exemptions, and includes provisions to prevent tax evasion. These treaties promote international trade and investment by providing clarity and cooperation on tax matters.

The exemption system is a method used to relieve double taxation on foreign-sourced income. It involves exempting the income earned in a foreign jurisdiction from taxation in the taxpayer’s country of residence.

European Regulation on Applicable Law

The main characteristics of the European Regulation concerning applicable law (Rome I Regulation) are:

  1. Scope: It applies to cross-border contractual obligations in civil and commercial matters within the EU.
  2. Party autonomy: Parties can choose the governing law for their contract, as long as it doesn’t violate mandatory provisions of the country with a close connection to the contract.
  3. Default rules: If no choice of law is made, the regulation provides default rules based on factors like performance, residence, and business location.
  4. Special contracts: Specific provisions exist for consumer, employment, and insurance contracts to address unique considerations or provide additional protection.
  5. Mandatory rules: The chosen law cannot override mandatory rules of the country with a close connection.
  6. Public policy exception: Courts can disregard the chosen law if its application contradicts the public policy of the forum state.
  7. Harmonization: The regulation aims to harmonize conflict-of-law rules within the EU for consistency and legal certainty.

Jurisdiction in International Sales Contracts

Determining jurisdiction in a conflict concerning an international sale of goods contract between a Swiss company and a Spanish one involves several steps:

Scheme for International Jurisdiction in Spain

  1. Contractual Clauses: First, check for specific jurisdiction clauses in the contract. If none exist, proceed to the next step.
  2. EU Law: Apply Regulation 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
    1. Analyze the scope of application.
    2. Determine if the contract falls within its general application (civil or commercial) or is excluded.
    3. Verify if the regulation applies based on the defendant’s domicile within the EU.
  3. Internal Measures: If EU Regulation 1215/2012 is not applicable, look for internal measures of international jurisdiction for contracts in the Spanish legal system.
    1. International Treaties:
      • Multilateral treaties (e.g., Lugano Convention 2007).
      • Bilateral conventions with specific countries.
    2. National Law: In Spain, refer to LOPJ (article 22 and following, as per the 2015 reformation).

Incoterms: Definition and Value

Incoterms, short for International Commercial Terms, are a standardized set of trade terms published by the International Chamber of Commerce (ICC) that define the rights and obligations of buyers and sellers in international trade transactions. They provide clarity and consistency in interpreting common trade practices and help avoid misunderstandings and disputes.

The primary value of Incoterms lies in their ability to establish uniformity and clarity in international trade contracts.

By using Incoterms, parties can:

  • Define roles and responsibilities
  • Allocate risk
  • Facilitate international trade
  • Minimize disputes

Incoterms and Jurisdiction

Incoterms themselves do not directly determine jurisdiction. However, the choice of Incoterms may indirectly influence jurisdiction through the inclusion of a choice of law clause and the selection of dispute resolution mechanisms in the contract. It is important to consider these factors and seek legal advice to determine the specific jurisdictional implications in each case.