Protocol

A protocol is an executed document that records the points of agreement reached by negotiating parties before finalizing a treaty. In the context of taxation, a protocol is signed and ratified by the parties involved in addition to an existing tax treaty. It serves to clarify, implement, or amend provisions of the original treaty.

Key Features: Relation to Tax Treaty A protocol is supplementary to a tax treaty. It may clarify ambiguities, update provisions, or modify certain terms without renegotiating the entire treaty. Timing Can be signed: Simultaneously with the original tax treaty After the treaty has been in force, to address emerging issues

Legal Effect: Once signed and ratified, the protocol holds the same legal authority as the treaty provisions it modifies or clarifies. Binding on the signatory countries under international law.

Purpose in Taxation: To ensure clarity and uniformity in applying treaty provisions. To prevent disputes between jurisdictions regarding tax obligations. To implement changes reflecting economic, legal, or administrative developments.

Example: Country A and Country B have a double taxation avoidance treaty (DTAA). Later, both countries sign a protocol clarifying the treatment of digital services income and updating withholding tax rates. The protocol modifies specific articles of the original treaty without replacing the entire agreement.