Tag: Article 7

Preface paragraph 9

The main mechanisms for resolving issues that arise in the application of international tax principles to MNEs are contained in these bilateral treaties. The Articles that chiefly affect the taxation of MNEs are: Article 4, which defines residence; Articles 5 and 7, which determine the taxation of permanent establishments; Article 9, which relates to the taxation of the profits of associated enterprises and applies the arm’s length principle; Articles 10, 11, and 12, which determine the taxation of dividends, interest, and royalties, respectively; and Articles 24, 25, and 26, which contain special provisions relating to non-discrimination, the resolution of disputes, and exchange of information ...

Sweden vs Flir Commercial Systems AB, March 2020, Stockholm Administrative Court, Case No 28256-18

In 2012, Flir Commercial Systems AB sold intangible assets from a branch in Belgium and subsequently claimed a tax relief of more than SEK 2 billion in fictitious Belgian tax due to the sale. The Swedish Tax Agency decided not to allow relief for the Belgian “tax”, and issued a tax assessment where the relief of approximately SEK 2 billion was denied and a surcharge of approximately SEK 800 million was added. The Administrative Court concluded that the Swedish Tax Agency was correct in not allowing relief for the fictitious Belgian tax. A double taxation agreement applies between Sweden and Belgium. In the opinion of the Administrative Court, the agreement prevents Belgium from taxing the assets. Consequently, any fictitious tax cannot be deducted. The Administrative Court also considers that the Swedish Tax Agency was correct in imposing a tax surcharge and that there is no reason to reduce the surcharge. The company’s appeal is therefore rejected. Click here for translation FÖRVALTNINGSRÄTTEN-I-STOCKHOLM-Mål-nr-28256-18-28261-18-och-22183-19 ...

Australia vs. Tech Mahindra Limited, September 2016, Federal Court, Case no. 2016 ATC 20-582

This  case is about the interpretation of Article 7 (the business profits rule) and Article 12 (the royalties provision) of the Agreement between the Government of Australia and the Government of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The issue was misuse of the provision in article 12 about cross-border royalties and article 7 about business profits. The case was brought before the Supreme Court, where special leave to appeal was refused 10 March 2017. Australia-vs-TECH-MAHINDRA-LIMITED-September-2016-Federal-Court-case-no-2016-ATC-20-582 ...

Spain vs. INC Bank, July 2015, Spanish National High Court

In the INC bank case the tax administration recharacterised part of the interest-bearing debt of the bank branch as “free” capital, with the consequent reduction of the tax-deductible expenses for debt interest. The adjustment made in relation to year 2002 and 2003 was based on the Commentaries on the OECD Model Convention approved in 2008 The court did not agree with the “dynamic interpretation” of Article 7 applied by the tax administration, in relation to “free” capital, and ruled in favor of INC Bank. Click here for translation Spain vs INC Bank 100715 Spanish National High Court ...

Norway vs. GE Healthcare AS, May 2015, Supreme Court , HRD-2015-01008-A

The Supreme Court concluded that the Norwegian taxation of incomes in Ireland were not in violation of the treaty Article 7. 1 and showed that the double taxation which thus arose, in Article 24. 2 gave GE Healthcare AS a tax deduction in Norway equal to the taxes paid by income in Ireland. Such deduction was made by tax decision in the case. GE Healthcare AS was thus protected against the overall tax burden in Norway and Ireland were greater than if the income were only taxed in Norway. There was no reason to limit the taxation of GE Healthcare AS beyond this. Click here for translation Norway vs GE-Healthcare-AS-sak-2014-1968-HRD-2015-01008-A ...