“27. The UK/Canada Convention is to be interpreted in accordance with the 1969 Vienna Convention on the Law of Treaties (“the Vienna Convention”). 28. Article 31 of the Vienna Convention provides that a treaty “shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the lights of its object and purpose”
“Put shortly, the aim of interpretation of a treaty is therefore to establish, by objective and rational means, the common intention which can be ascribed to the parties. That intention is ascertained by considering the ordinary meaning of the terms of the treaty in their context and in the light of the treaty’s object and purpose. Subsequent agreement as to the interpretation of the treaty, and subsequent practice which establishes agreement between the parties, are also to be taken into account, together with any relevant rules of international law which apply in the relations between the parties. Recourse may also be had to a broader range of references in order to confirm the meaning arrived at on that approach, or if that approach leaves the meaning ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable.” 29. Since there has been some comparison between the French and English wording of Article 6(2), Article 33 of the Vienna Convention may also be relevant: “1. When a treaty has been authenticated in two or more languages, the text is equally authoritative in each language, unless the treaty provides or the parties agree that, in case of divergence, a particular text shall prevail. 2. A version of the treaty in a language other than one of those in which the text was authenticated shall be considered an authentic text only if the treaty so provides or the parties so agree. 3. The terms of the treaty are presumed to have the same meaning in each authentic text. 4. Except where a particular text prevails in accordance with paragraph 1, when a comparison of the authentic texts discloses a difference of meaning which the application of articles 31 and 32 does not remove, the meaning which best reconciles the texts, having regard to the object and purpose of the treaty, shall be adopted.” 30. The UK/Canada Convention, like most bilateral double taxation treaties, is based on the OECD Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development (“the Model Tax Convention”). The Model Tax Convention states in its Introduction that its main purpose is to provide “a means of settling on a uniform basis the most common problems that arise in the field of international juridical double taxation”: “As recommended by the Council of the OECD, Member countries, when concluding or revising bilateral conventions, should conform to this Model Convention as interpreted by the Commentaries thereon and having regard to the reservations contained therein and their tax authorities should follow these Commentaries, as modified from time to time and subject to their observations thereon, when applying and interpreting the provisions of their bilateral tax conventions that are based on the Model Convention.” 31. The Commentaries on the Model Tax Convention are drafted and agreed upon by experts appointed to the Committee on Fiscal Affairs by the Governments of member countries. The Commentaries say at para 29.1 that they can be of great assistance “both in deciding day-to-day questions of detail and in resolving larger issues involving the policies and purposes behind various provisions”
“So one should be wary of trying to lay down a definition of ordinary words; the meaning of an ordinary word is to be found not so much in a dictionary but in how it is in fact ordinarily used, and I think it is generally more helpful to tease out the meaning of ordinary words by providing illustrative examples of how they are used in everyday contexts.”
“A social security pension may be said to be “in consideration of past employment” if employment is a condition for that pension. For instance, this will be the case where, under the relevant social security scheme: - the amount of the pension is determined on the basis of either or both the period of employment and the employment income so that years when the individual was not employed do not give rise to pension benefits, - the amount of the pension is determined on the basis of contributions to the scheme that are made under the condition of employment and in relation to the period of employment, or - the amount of the pension is determined on the basis of the period of employment and either or both the contributions to the scheme and the investment income of the scheme.”
“Any pension …. derived from sources within the United Kingdon by an individual who is resident of Israel and subject to Israel tax in respect thereof, shall be exempt from United Kingdom tax.”
“Income which is exempted from taxation cannot during the currency of the exemption be income in respect of which an individual can be said to be subject to tax.”
“As the Article is drafted, this rule applies irrespective of whether the right to tax is in fact exercised. If the income arises in the other Contracting State, that State cannot therefore impose tax even if the income is not taxed in the first mentioned State. In order to avoid non-taxation, the Contracting States can agree to limit the scope of the Article to items of income which are subject to tax in the Contracting States of which the recipient is a resident and modify the Article in the way.”
“In order to avoid non-taxation, Contracting States may agree to limit the scope of the Article to income which is taxed in the Contracting State of which the recipient is a resident and may modify the provisions of the paragraph accordingly…”