The Principle of Nexus or Genuine Link as a Keystone of International Income Tax Law: A Reappraisal

Abstract

In this article, the author analyses the legal status of the so-called ‘nexus principle’, i.e. the requirement that a qualifying connection exists between the state exercising its taxing power on the one hand and taxable subject and/or taxable object on the other. It is argued that the nexus principle forms part of general international law of income tax jurisdiction, since it has attained the status of international custom. Put differently, international customary law prohibits income taxation in the absence of both personal and territorial nexus. In the light of the well-established methodology for ascertaining international customary law, support for such conclusion is found mainly in relevant norms of tax treaty law and domestic tax laws. Accordingly, the nexus principle may be considered as a keystone of international income tax law.

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