The trend towards tax treaties in the region is analysed, specifically the Andean pact and the OECD model as applied by South American countries. Some specific differences and special issues in tax treaties of the region are presented and discussed. The U.K. adopts the dualist theory of international law, and double taxation treaties have to be transformed into domestic law. In general they override inconsistent domestic law provisions. Most U.K. treaties are based on the OECD model convention.
Modern treaties differ in a number of respects from older treaties still in force.
U.K. treaties invariably adopt the credit method. A per source limitation is applied to foreign tax credits. One of the key issues is the limitation of relief on trading profits to tax on the net amount, not the gross receipts. The treatment of subsidiaries and of branches has increasingly coalesced. Knowledge of the effects of both methods gives ample scope to various creative tax options which have gathered momentum in international business.