‘Value’ Included in Articles 13(4) OECD/UN Models and Similar Provisions in Actual Tax Treaties: ‘Book Value’ Or ‘Market Value’?

The term ‘value’ is used in numerous legal provisions, also in domestic tax laws and tax treaties. In this contribution, I focus on the term ‘value’ included in Articles 13(4) OECD/UN Model Tax Conventions on Income and Capital (hereafter: OECD/UN Models) and similar provisions in actual tax treaties. The most recent OECD/UN provision reads as follows: “4. Gains derived by a resident of a Contracting State from the alienation of shares or comparable interests, such as interests in a partnership or trust, may be taxed in the other Contracting State if, at any time during the 365 days preceding the alienation, these shares or comparable interests derived more than 50 per cent of their value directly or indirectly from immovable property, as defined in Article 6, situated in that other State.”The term ‘value’ has not been defined in the OECD/UN Models and, as far as I know, neither in actual tax treaties. This observation lead me to the research question of this contribution: What should be the meaning of the term ‘value’ included in Articles 13(4) OECD/UN Models and similar provisions in actual tax treaties: a ‘book value’ or a ‘market value’? The contribution has been structured as follows. I start with discussing the impact of the VCLT on the interpretation of the term ‘value’ (section II). In this context, I address the ordinary meaning of the term ‘value’ as meant in Article 31 VCLT (section II.A). Subsequently, I investigate the potential impact of OECD/UN Model Tax Conventions and their Commentaries as supplementary means of interpretation as meant in Article 32 VCLT on the interpretation of the term ‘value’ (section II.B). Assuming that OECD/UN Model Tax Conventions and their Commentaries can be used as supplementary means of interpretation, I research what their impact may be on the interpretation of the term ‘value’ included in Articles 13(4) OECD/UN Models and similar articles included in actual tax treaties. I firstly discuss the OECD Models and their Commentaries (section III) and subsequently the UN Models and their Commentaries (section IV). Finally, I investigate the potential impact of the general interpretation rules included in Articles 3(2) OECD/UN Models and similar provisions in actual tax treaties on the interpretation of the term ‘value’ (section V). The contribution ends with the main conclusions (section VI).