Abstract of dissertation
Specifics of interpretation and application of treaties on
avoidance of double taxation
JUDr. Tomas Balco, LL.M., FCCA
1. Introduction
Tax Treaties appeared as a phenomenon of international public law as well as phenomen of
fiscal law and policy already more than 100 years ago. Historically, the very 1st
tax treaty was
however concluded between two German States - Saxonia and Prussia in 1869.1
In 1920's, the tax treaties started to become part of international tax architecture, which has
lead to creation of structures and principles that are fundamental to conducting cross-border
business and investment.
Tax treaties in large part succeeded in achieving their primary objective, which was the
elimination of double taxation, but increasingly the tax treaties are coming into spotlight of
research and analyses, because there seem to appear negative spillovers in form of unintended
spill-overs in form of:
tax avoidance practices taking advantages of tax treaties, which in turn lead to losses
of revenues of all countries - both developed and developing countries;
base erosion and profit shifting practices that are not primarily based on the tax
treaties, but tax treaties are used as instruments to circumvent the anti-avoidance
provisions in the domestic laws, which are then rendered non-operative; and
potential constrains on developing countries, where the tax treaties may lead to the
effect of depriving them of much needed tax revenue and thus impairing their ability
to activate and mobilize their domestic resources.
In my work, I decided to address selected issues of tax treaty application and interpretation,
especially with the view to analyse and explain how the tax treaties operate and what the
specific risks are for the governments.
I have systematically reviewed all the relevant tax treaty provisions - to analyse the operative
rules and also to identify, whether they pose an opportunity for tax avoidance and risks for
domestic resource mobilization.
Furthermore, I carried out an extensive research into the real tax treaties with a view to
identify the errors and mistakes that developing countries have committed in the process of
negotiating their tax treaties and what are the lessons that can be drawn from those mistakes
and how others can learn from them.
1
Treaty of 16 April 1869 regarding direct taxes. See also K.Vogel, Double Tax Treaties and their
interpretation, Berkeley Journal of International Law, Vol. 4, Iss. 1 [1986], Art. 1, p.10. For more details of this
treaty refer to J.Tiley, Studies in the history of tax law, Vol.6, Hart Publishing 2014.
Once I found evidence, that some developed countries can intentially "trick" the developing
countries into conclusion of treaties, which are not favourable to their development needs, I
have carried out in-dept research and analyses into tax treaties concluded by the Central
European countries (Czech Republic, Poland, Slovakia and Slovenia) to identify whether also
countries in our region do carry out such unfair practices.
As I progressed with my work, I have been intriqued to understand the origins of the tax
treaty evolution process and therefore I have deepened my research into the historical
evolution - especially in the period of the League of Nations, which is not very well known.
This additional research allowed me to better understand how the tax treaties evolved and
who the key players were and how they shaped the existing tax treaty policy.
Finally, I wanted to reflect on the latest developments in the tax treaty policy, which was
affected by the OECD BEPS project and I analyse how this project influenced further
development of the OECD Model Tax Convention. Part of this analyses included studying
the efforts of creating a multilateral convention as well as the most recent development formulation
of the Multilateral Instrument and the process of its adoption.
2. Research objectives, research questions and methodology used
2.1. Analysing the tax treaty framework
The first objective of my work was to comprehensively analyse the framework of tax treaties.
There is a lot of fragmented information available in different sources, but there is reraly a
coherent piece of literature, which would map out and summarize the tax treaty framework.
I have carried out literature analyse to identify different sources of writing on this subject and
analysed the various types of tax treaties that can be found to identify the main types and
categories. I have researched on domestic laws of various countries to identify, how these
laws reflect on tax treaties and how the tax treaties interact with domestic law. Furthermore, I
studied and carried out comparative analyses of all the main Model Tax Conventions OECD
and UN Models, but also analysed less known models used in the region of North
America, Caribean, Africa and Asia.
The questions addressed in this part of my work addressed the following:
- What are tax treaties?
- What types of tax treaties exist and how can they be categorized?
- What is the relationship between domestic tax law and tax treaties?
- What is the format and structure of tax treaty?
- Why the existing tax treaties are very similar and what role in this process is played by the
existence of the Model Tax Conventions?
- What are the main Model Tax Conventions and how do they compare and differ?
- Are there any alternative Model Tax Conventions, which are less known?
- What is the role of the EU and how does EU tax law interact with tax treaties?
- What is the role of tax treaties in the tax competition?
The extensive research providing answers to these questions is summarized in Chapter 2 of
this work.
2.2. Understanding the evolution and development of the Model Tax
Conventions
As I identified various types of Model Tax Conventions, I found it important to understand
the origins of the tax treaty evolution process and therefore I have carried out in depth
research of historical documents from the period of the League of Nations, which is not very
well known. Most of these documents are very rarely known and are 70-80 years old.
In a systematic way, I have studied each of these documents prepared by the different bodies
of the League of Nations to analyse the process of formulation of the tax policy
recommendations by the Fiscal Committee and its ad hoc subsidiary bodies as well as group
of experts.
I also tried to identify, who the specific experts that were taking part in the work of the
League of Nations and which countries they represented. This turned out useful to understand
that it was actually only hand-full of key countries and stakeholders, which have formulated
the origins of international taxation, which are followed by the rest of the world until today.
I have then analysed the specific recommendations in great detail to understand to what
extent were these provisions designed to benefit the main stakeholders involved in this
process - in other words - did the experts and countries participating in this process bring
their national interest into the process of forming the global tax policy?
This additional research allowed me to better understand how the tax treaties evolved and
who the key players were and how they shaped the existing tax treaty policy.
The specific research questions addressed in this section were:
1) What has triggered the work of the League of Nations?
2) How was the work gradually evolving?
3) How many Model Tax Treaties were formulated and how did they evolve over time?
4) Who were the main countries involved in formulating the foundations of international tax
policy?
5) Is there any evidence of possible conflicts of interest between developed and developing
countries and how was it addressed?
6) Which of these interest has prevailed in formulating further international tax policy?
7) How did the work of the League of Nations continue after this international organization
was dissolved?
The findings from this part of my research are summarized in the Chapter 3 of this work.
2.3. Process of tax treaty negotiation and possible mistakes or errors?
In this part of my work, I have reflected on my practical experience in tax treaty negotiation,
in which I was involved during my professional career with the Ministry of Finance of the
Czech Republic and also Ministry of Finance in Slovakia.
I have specifically attempted to explain the principles of allocation of taxing rights in the tax
treaties and how they can effect the outcomes and the ability of countries to exercise their
taxing rights.
Based on my prior work experience, I have described and summarized the process of tax
treaty negotiation as well as key steps in this process.
I have also explained what is the relevance and benefits of using the model conventions in the
process of tax treaty negotiation.
I have also identified and explain key specific issues arising in the process of tax treaty
negotiation.
Separately, I have explained what are the possible mistakes that can happen in the process of
tax treaty negotiation and carried out research to identify the most blatant examples of where
countries made significant mistakes, which have lead to loss of revenues and in some cases
also culminated in the termination of tax treaties.
Futhermore, I have tried to explain what the benefits of the tax treaties are and what tools
they contain for tax administrators to assure effective tax enforcement and dispute resolution.
The results of these efforts are summarized in Chapter 4 of this work.
2.4. Selected issues of interpretation and application of tax treaties
In this part of my work, I decided to address selected issues of tax treaty application and
interpretation, especially with the focus on the relevant provisions in the treaty.
I have approached this through systematic analyses of the provisions of the tax treaties, which
regulate the scope of application of tax treaty, contain definitions of key terms and finally
focused on the key principles underlying each of the rules that lead to allocation of taxing
rights.
I have studied extensively the tax treaties themselves, as well as Commentaries to the Model
Tax Conventions to gain better and deeper understanding of how the tax treaties are intended
to operate and what is the purpose and objective of each provision.
I have combined this with the research on case law that could help and provide practical
examples of how the courts deal with the tax treaty interpretation and application in specific
cases.
I have summarized my understanding both through detailed explanations of how each rule
and principle in the treaty should operate, but I also highlighted where are the differences
between the OECD and UN Model Tax Conventions and where the practical issues may arise
in practice and how they can be resolved based on grammatical interpretation, but keeping
also in mind the other principles relevant for tax treaty interpretation - such as taking into
regard the object and purpose of the tax treaties as well as their context.
On the more difficult issues I also provided practical scenarios and examples of how the tax
treaties are intended to apply.
The key questions that I addressed in this part of my work were the following:
- What are the key principles for tax treaty interpretation?
- What is the scope of tax treaty application?
- What are the key definitions and how to interpret terms, which are not defined in the tax
treaties?
- What are the key provisions in the tax treaties that deal with taxation of income from
entrepreneurial activities and how are they intended to apply in practice?
- Are there any relevant provisions in the tax treaties dealing with income shifting as a result
of transfer pricing and how do they operate?
- What are the key provisions in the tax treaties that deal with income of individuals and how
are they intended to apply in practice?
- What are the key provisions in the tax treaties that deal with passive income (income from
investments) and how are they intended to apply in practice?
- How is the double taxation eliminated and what are the methods for elimination of double
taxation in the tax treaties and how are they intended to apply?
- How is the interpretation and application of tax treaties adopted to the digital age and digital
business and e-commerce?
- How should the tax treaties be interpreted in light of tax avoidance practices?
The results of this part of my research work are summarized in Chapter 5 of this work.
2.5. Implications of BEPS project on the tax treaties
In this part of the work, I have analysed the BEPS project and the relevance of the different
BEPS Actions for tax treaties.
I have reviewed the latest version of the OECD Model Tax Convention from 2017 to identify
how the BEPS project influenced this model convention and how this will impact future tax
treaties negotiated based on this model.
In this regard, I have focused on the following questions:
1) What is BEPS project and why was it needed?
2) What are the key Actions and recommendations of BEPS project?
3) Which of this Action and recommendations are relevant for tax treaties?
4) What are the specific provisions, which have been implemented into the OECD Model Tax
Convention and what implications will this have for tax avoidance and treaty shopping?
The results of this work are summarized in Chapter 6 of this work.
2.6. Prospects of Multilateral Conventions
In this part of my work I have focused on the possibility that Multilateral Convention could
substitute for the bilateral conventions.
In the process, I have analysed the historical attempts and also actual real examples, which
have been introduced in the past but also exist until today.
I have also reflected on the latest developments in this area - the Multilateral Instrument.
The questions addressed in this part focused on the following:
1) What is a multilateral convention and why we did not start in 1920ies with one Multilateral
convention and instead ended up with 3.000 bilateral tax treaties?
2) What were the attempts made during the history in the different parts of the world and
which of these attempts survived until today?
3) What is the Multilateral Instrument and how does it operate?
4) What are the prospects of more work to be done on further Multilateral conventions?
The results of this work are summarized in Chapter 7 of this work.
2.7. In depth analyses of the tax treaties concluded between the CEE
countries and developing countries
As the earlier parts of my research showed evidence, that some developed countries can
intentionally "trick" the developing countries into conclusion of treaties, which are not
favourable to their development needs, I have carried out in-dept research and analyses into
tax treaties concluded by the Central European countries (Czech Republic, Poland, Slovakia
and Slovenia) to identify whether also countries in our region do carry out such unfair
practices.
For this research, I have selected 32 real tax treaties concluded by the four Central European
countries - four each country I have selected 8 tax treaties, which were concluded with the
developing countries in different periods of time.
I have reviewed and analysed each treaty into detail and compared to the OECD and UN
MTC to identify similarities and differences.
To reflect on the findings, I have established a methodology - colour map - to indicate
potentially harmful elements with the tax treaties with colours - so that for each of the
selected CEE countries there is an first sight indicator/impression of how each country may
impact on the ability of developing countries to mobilize their domestic resources.
Primary objective of the part of my research was to map impact of DTTs of selected countries
form the CEE region (Czech Republic, Slovakia, Poland and Slovenia) on developing
countries. The objective is to concretely identify harmful practices in the treaties that can
undermine the capacity of domestic governments to effectively defend their tax base against
erosion and profit shifting.
Results of this part of my work may be important to inform possible discussion with
government officials / politicians about direct impact of CEE countries tax policy on
developing countries in order to strengthen the "policy coherence" aspect of nondevelopment
policies and also to increase understanding about international and development
dimension of tax. The multi-country focus enabled me to identify commonalities between the
countries, which could strengthen cooperation between NGOs in the CEE region around this
issue and could lead to "regional advocacy recommendations" towards the governments (for
instance as "Visegrad countries" initiative).
3. Findings and Conclusions
3.1. Conclusions on the tax treaty framework
In this section I explain what role tax treaties play in the area of international taxation. Tax
treaties serve as norms of international law, which seeks to provide coordination provisions to
prevent double taxation in relation between the two contracting states.
I also identified that the tax treaties can be mainly categorized based on the number of
parties, which sign them - to bilateral and multilateral tax treaties and based on the scope of
the tax treaties to comprehensive or specific (limited) tax treaties.
Furthermore, I have analysed the tax treaty as a source of international law norms and how
these provisions interact with domestic in different forms and with different results. This
interaction can have a form of mutual supplementation, where the domestic law can provide
important definitions and concepts including the establishment of the tax liability, while the
tax treaties provide norms, which can in effect restrict the country from exercising its taxing
rights and thus this interaction also involves aspects, where the tax treaty must clearly prevail
over domestic law. Separately, I also identified issues of so-called treaty over-ride, which is
the situations, where in exceptional cases the domestic law prevails over the tax treaty
provisions.
I have analysed the structure and format of tax treaties and identified significant similarities
but also some differences between the OECD and UN MTC. In this process I have also
identified other model conventions used in different regions and continents - namely the
ASEAN Model tax treaty and the Model Convention of South African Development
Community.
I have also analysed how the harmonization of the tax law in the EU may have similar
implications on the taxing rights of the EU member countries and explained how this process
takes place and what the implications are in some areas.
Finally, I explained, why the tax treaties may pose risks to tax revenue collection, especially
in situations, where the tax treaties are concluded between developed and developing
countries.
3.2. Conclusions the evolution and development of the Model Tax
Conventions
The key findings related to this section are the following.
The foundations of the principles of international taxation have been layed through the work
of the League of Nations, which is the predecessor of the United Nations. Th trigger for work
of the League of Nations was the recommendation from International Financial Conference
held at Brussels in 1920, which recommended that the League of Nations should take up and
analyse the questions of double taxation with a view to facilitate cross-border investment and
especiall financial transactions include lending operations.
The initial work of the League of Nations was performed under the auspicies of the Financial
Committee of the League of Nations, which was entrusted with the study of double taxation.
The Financial Committee entrusted in 1921 the theoretical study of Double Taxation to four
economists, M . BRUINS, M . EINAUDI, M . SELIGMAN and Sir Josiah STAMP.
These economists have formulated the following analytical test, which included four
considerations that aided them to provide suggestions for allocation of taxing rights in respect
of income and property. These four considerations were the following:
1) The principle of origin of wealth, which addresses the question where does the acquisition
of wealth taxing place? Or where is it produced?
2) The principle of situs of wealth, which addresses the question of where is the actual
location of the wealth, which was generated?
3) The principle of legal rights to the place of enforcement of the rights to the wealth, which
addresses the question - where does the enforceability of the rights to wealth take place?
4) The principle of domicile - namely place of consumption or appropriation or disposition to
the place of residence or domicile, which addresses the question - where is the wealth
actuatlly enjoyed or where does consumption of wealth take place?
The work of League of Nations then continued in form of Committee of Experts, which was
formed, when on October 17th, 1922, the SecretaryGeneral of the League of Nations, in
accordance with a proposal which was made by the Financial Committee and approved by the
Council. The Committee was formed from 7 technical experts nominated by the Belgium,
Czechoslovakia,2
France, Great Britain, Italy, Netherlands and Switzerland.
The work of this Committee of experts has analysed both the theoretical inputs of the four
economists and also the actual developments taking place in this period. It is notable that a lot
of development in the area of international taxation was triggered by the geopolitical
constalation after the 1st
world war, where a number of succession states were from from
previous Austrian-Hungarian Empire and due to the intensive economic interaction between
these states, there was a need to address the issues of potential double taxation.
Czechoslovakia was one of these succession states and has concluded a number of bilateral
tax treaties with other succession states in this period of time, which were analysed in great
depth and inspired also further work and recommendations of the League of Nations.
Next to the questions of double taxation, these experts also identified that it is equally
important to address the issues of tax evasion and to provide tools and legal framework to
allow the tax authorities to effectively combat these practices.
This work has culminated in the formulation of 4 models or draft conventions of the League
of Nations in 1927, which were also approved by the General meeting of Government experts
in 1928. On this occasion also a new Committee of Technical Experts was appointed.
The question of double taxation has to be treated in two conventions:
(a) Draft Convention for the Prevention of Double Taxation.3
(b) Draft Convention for the Prevention of Double Taxation in the special matter of
Succession Duties.4
The question of tax evasion has also to be dealt with in two conventions:
(c) Draft Convention on Administrative Assistance in Matters of Taxation,5
2
The representative for Czechoslovakia was Dr. VALNICEK, Head of Department at the Ministry of Finance.
3
See the Draft Convention including its Commentary on pages 10-18 of the Report of Committee of Technical
Experts on Double Taxation and Tax Evasion registered as League of Nations document C. 216. M . 85 dated in
London on April 12th, 1927.
4
See the Draft Convention including its Commentary on pages 19-21 of the Report of Committee of Technical
Experts on Double Taxation and Tax Evasion registered as League of Nations document C. 216. M . 85 dated in
London on April 12th, 1927.
(d) Draft Convention on Judicial Assistance in the Collection of Taxes.
For the several more years, the Committee of Technical Experts has carried out further
monitoring as well as analyses of the new tax treaties concluded, which has carried out 10
more meetings in the period of 1929 - 1946. The work of this Committee has culminated in
two more model conventions - namely the Mexico Model from 1943 and the London Model
from 1946.
While most of the meetings were dominated by experts from the developed countries (capital
exporting) countries, the the meeting in Mexico had a higher representation of experts from
developing countries, especially in Latin America. This has resulted in the outcome that the
Mexico model is very much focused on the principles allowing the country of source or
origin of income to tax this income at source and in most cases exclusively at source. This
Mexico model was in stark contrast with the other model conventions produced by the
League of Nations and it was prompty followed by another model - London Model, which
has reversed a number of the taxing rights exclusively - back to the country of residence.
This clash of interests of the capital exporting and capital exporting countries is an underlying
phenomenon of the international taxation as it very well captures the tention between the
concepts of source and residence and also has a great influence on the fact how the tax policy
principles are being formulated until today.
The concepts and ideas of the Mexico model are not lost, in fact, they have survived in some
of the regional or bilateral tax treaties and most notably, they are in large part incorporated in
one of the few multilateral convention - the CARICOM treaty, which is in place and
applicable until today.
It must be however acknowledged that the London Model was the "winner" in terms of how
the futher work has evolved under the leadership of OECD and carefully balanced by the
United Nations. The work of United Nations also builds on the residence based taxation
principles, while on several articles it allocates some more extended taxing rights to the
country of source.
The struggle between the source of residence principles and interests of the developed and
developing countries has been largely a struggle, which has been played out in the United
Nations Committee of Experts. With the creation of Inclusive Framework for BEPS, the
OECD is opening up for the dialogue with the developing countries and it remains to be seen,
whether as a consequence, this struggle will continue being played now in both places or
even whether the OECD will assume truly global leadership in formulating the global tax
treaty policy as it succeeded in doing through the BEPS project.
5
See the Draft Convention including its Commentary on pages 22-25 of the Report of Committee of Technical
Experts on Double Taxation and Tax Evasion registered as League of Nations document C. 216. M. 85 dated in
London on April 12th, 1927.
6
See the Draft Convention including its Commentary on pages 26-30 of the Report of Committee of Technical
Experts on Double Taxation and Tax Evasion registered as League of Nations document C. 216. M. 85 dated in
London on April 12th, 1927.
3.3. Conclusions on analyses of the process of tax treaty negotiation and
possible mistakes or errors
The tax treaties contain the provisions, which allocate exclusive taxing rights mainly to the
country of residence. This provides for an effective way of elimination of double taxation as
well as administrative simplicity.
On the other hand, the exclusive taxing rights allocated to the country of residence constrain
and limit the country of source (often time capital importing or developing country). This can
prevent these countries from exercising their taxing rights.
Furthermore, when the tax treaty is concluded between the country, which does not levy tax
on its residents or applies a special tax regime, this creates situations of potential double nontaxation,
which can be very attractive for the taxpayers, but this also leads to the erosion of
tax base and profit shifting.
There are several important steps in tax treaty negotiation:
1. Identification of a need for a treaty
2. Initial contacts
3. Appointment of a delegation
4. Preparation for negotiations
5. Conduct of the negotiations
6. Preparation for the signature of the treaty
7. Ratification and entry into force
One of the most strategically important step is the very first step - identification of a need for
a treaty. When the countries embark on the negotiation of tax treaties without clearly
identifying the needs for the conclusion of such a treaty and the country seeks to conclude the
tax treaty merely as a gesture of diplomatic courtesy, this can have far reaching implications
on the country and its ability to effectively raise its revenue and enforce the tax liabilities.
In many cases, the developing countries simply loose the ability to levy and collect tax as a
consequence of conclusion of tax treaty and even their own tax residence may seek to
establish entities abroad to carry out their investments not as residents, but as non-residents,
because this way they can avoid the relevant tax liabilities.
This outcome makes the conclusion of tax treaties largely attractive for the taxpayers who
then use various means of lobbying and influencing politicians that they should initiate and
conclude a tax treaty with a particular jurisdiction, which may have a special tax regime (e.g.
applying territoriality principle) or has no tax regime in place or alternatively the country is
engaged in harmful tax practices, where as a result of special domestic law measures it will
either exempt some types of income partially or entirely.
Where the tax treaties are being negotiated, it is important that the less-experienced
negotiators stick to the text of the Model Tax Conventions, rather than experiment with new
types of provisions, which could be offered to them by their counterparts.
There is clearly evidence of instances where countries made either badly informed decisions
as a part of tax treaty negotiation or they were "tricked" into some types of tax provisions, the
effect of which is creating opportunities of tax avoidance and double-non-taxation.
In such a case, countries may resort to the efforts of renegotiation of such tax treaties or in
extreme cases - to stop the tax revenue losses in expedient way to terminate such tax treaties.
This was also evidenced by Mongolia terminating the tax treaties with the Netherlands,
Luxemburg, UAE and Kuwait.
Furthermore, where the tax treaty is being put in place, it is also important to ensure that the
negotiators keep in mind also the other objectives of tax treaties and utilize where possible
also the provisions, which should allow the tax administration to effectively enforce the tax
liabilities - this is especially relevant in respect of the inclusion of provisions on exchange of
information and enforcement of revenue claims, which provide for tools and legal framework
to prevent and minimise tax evasion.
3.4. Conclusions on specifics of tax treaty interpretation and application
In this section I analysed and explained the principles of tax treaty interpretation based on
international public law and especially based on the Vienna Convention on the Law of
Treaties.
Subsquently, I reviewed and analysed the relevant sections and provisions of tax treaties with
a view to explain the interpretation and application of these provisions. Where appropriate, I
have demonstrated the application of the relevant provisions also on practical examples.
Special attention was dedicated to complex interpretation of attribution of permanent
establishments, where I explained the three different approaches (in absence of the tax treaty,
OECD Authorized approach and also the other approach based on the UN MTC).
Also special attention was dedicated to provisions, which deal with taxation of individuals
and on different scenarios I have demonstrated the application of the relevant rules and
principles.
Similarly, I have carried out analyses of provisions dealing with passive income - namely
dealing with dividends, interest and royalties.
Specific complications that may arise in tax treaty application were analysed on the court
decisions, where the courts interpreted and applied the cases to specifics facts and
circumstances.
Finally, I have analysed issues related to tax avoidance in the context of tax treaties and in
doing so, I also addressed the issues related on identification of what behaviour constitutes
the tax avoidance and how to distinguish it from tax planning and tax avoidance. I have also
addressed the possibilities of countries to challenge the tax avoidance behaviour and
specifically what options and measures are available to countries in the context of tax treaties.
3.5. Conclusions Implications of BEPS project on the tax treaties
In this section I analyses the recent developments, which had implications on the OECD
Model Tax Convention especially due toe BEPS Project.
I have specically analysed the implications of Action 6, which contains a number of
recommendations with measures, which are designed to prevent the abuse of tax treaties. This
abuse can be two-fold. First, the abuse may involve the use of the benefits of the tax treaties,
where such benefits were not intended for the specific persons using such benefits - e.g.
situations of treaty shopping. Second, the abuse may involve the use of treaties to circumvent
the effect of provisions in the domestic law, which are decigned to prevent base erosion and
profit shifting. All of these measures were introduced into the OECD Model Tax Convention,
either as changes to the relevant provisions, or as a part of interpretation contained in the
Commentaries to the OECD Model Tax Convention. It is also important to note that most of
these provisions were also taken on board by the UN Committee of Experts and these
provisions are also becoming part of the UN Model Tax Convention.
Furthermore, I specifically analysed the effect of the Action 7, which contains a number of
provisions, which were designed to prevent the avoidance of the permanent establishment
status. This is especially by taking advantage of provisions, which were designed to limit the
definition of permanent establishment - such as exceptions in relation to preparatory and
auxiliary activities in Article 5 paragraph 4, and in relation to definition of indepent agent
concept in paragraph 6. It is important to note that these measures were also introduced into
the OECD Model Tax Convention, either as changes to the relevant provisions, or as a part of
interpretation contained in the Commentaries to the OECD Model Tax Convention. It is also
important to note that most of these provisions were also taken on board by the UN
Committee of Experts and these provisions are also becoming part of the UN Model Tax
Convention.
3.6. Conclusions on Prospects of Multilateral Conventions
In this section I analysed what was the origins and efforts related to the possibility of
conclusion of multilateral conventions.
These efforts have clearly started already in the period of League of Nations, but the
agreement was reached, not to proceed with a conclusion of a multilateral treaty, but rather
recommendations were made to encourage countries to conclude bilateral tax treaties.
It can be contemplated, whether this was a mistake that the League of Nations did not made
more efforts in formulating and proposing a multilateral treaty for signature. It could be
considered as mistake because the bilateral approach to elimination of double taxation has
brought on one side a lot of flexibility for each country to establish the allocation of taxing
rights as is best for its national interest, but due to differences in the technical capacities we
can evidence many developing countries making mistake in conclusion of treaties, which
have lead to revenue losses and opportunities to base erosion and profit shifting.
Skilled tax advisers have developed skills to take advantage of the gaps and errors resulting
from bilateral negotiations and also found ways of how to carry practices such as treaty
shopping to take advantage of the most favourable tax treaties.
The effect that has resulted was on one side leading to:
- losses of tax revenues due to inherent imbalances between the economic and mutual trade
positions and investement flows,
- losses of tax revenues due to rules of allocation of exclusive rights, where the other country
was exempting the income as a part of tax competition practices;
- losses of revenues due to tax planning and tax avoidance behaviour.
The possibility of concluding multilateral tax treaties between a larger number of countries is
clearly evidenced by the conclusion of the historical multilateral conventions - such as
Caricom or Comecon tax treaties as well as more recently the Nordic tax treaty.
Most fascinating is the emergence of the Multilateral Instrument as one of the results and
deliverables of the BEPS projects. This multilateral is both an example of possibility to reach
convergence on very complex tax issues, but also it is a phenomenon of evolution of
international public law. It also is evidence that there are still unexplored opportunities for
eliminating the possible negative effects resulting from the system of bilateral tax treaties.
3.7. Conclusions andfindingson the in depth analyses of the tax treaties
concluded between the CEE countries and developing countries
Based on the undertaken study, I did not observe the intentional harmful effect of the CEE
countries' treaties on the economies of developing countries.
While it is understood that, the CEE countries as OECD member countries use the OECD
MTC as the base for negotiation of tax treaties with the developing countries, the actual
treaties are not worse than provisions inspired by the OECD MTC itself. In many cases, the
provisions of UN MTC are used. This is especially the case with the treaties concluded by
CEE Countries and the countries such as India and Vietnam. Some of these treaties go even
beyond the benefits provided by the UN MTC.
There is however no consistency in how the four CEE countries approach the developing
countries. It is clear that the more beneficial treaties for developing countries are mainly a
result of negotiation skills of some of the developing countries as well as their persistency.
In addition to specific country recommendations provided in each chapter, I would generally
recommend the CEE countries to take into account the particular needs and interest of the
developing countries when negotiating the tax treaties with them and where appropriate use
the UN MTC.
It may be considered, whether the CEE countries could formally commit to use of the UN
MTC, when concluding tax treaties with developing countries, which are not members of
OECD. This could be in line with the policies to assist the developing countries to mobilise
their domestic resources.
The UN MTC is not harmful to the policies of CEE countries. While the UN MTC may give
some more taxing rights to the developing countries, this is unlikely to undermine the public
budgets of the CEE countries, while it can make significant difference in the tax revenues of
the source countries.
This is especially the case, where the CEE countries under domestic law exempt certain types
of income and insistence on provisions, which take away taxing rights from developing
countries may also lead to double non-taxation.
The provisions of most of the reviewed tax treaties are not explicitly harmful for developing
countries, but they may be considered as potentially harmful from the perspective that there
may be unbalanced flow of income between CEE and developing countries. The allocation of
taxing rights may thus favor countries which may be receiving return on investments as well
as income from provision of services.
I also perceive there are benefits arising from the BEPS recommendations - specifically
Action 6 and 7, which can strengthen both the existing treaties, which could be amended by
accession to the Multilateral Instrument (MLI) and accepting the options provided by the
MLI also in respect of developing countries.
In this respect, the very conservative position of the Czech Republic opting only for the
minimum standard is especially worrying as it can leave number of the existing treaties with
developing countries subject to abuse. This was the core objective of Actions 6, 7 to limit the
abuse of tax treaties and to strengthen the permanent establishment provisions. But the
approach of Czech Republic can in fact also cause difficulties to other CEE countries, while it
could make the Czech Republic to appear more competitive and attractive for MNEs.
4. Table of Content
Table of Content 15
Terms Used Chyba! Záložka není definována.
1. Introduction Chyba! Záložka není definována.
1.1. Background Chyba! Záložka není definována.
1.2. Research objectives, research questions and methodology usedChyba! Záložka není definována.
1.2.1. Analysing the tax treaty framework Chyba! Záložka není definována.
1.2.2. Understanding the evolution and development of the Model Tax ConventionsChyba! Záložka ne
1.2.3. Process of tax treaty negotiation and possible mistakes or errors?Chyba! Záložka není definoval
1.2.4. Selected issues of interpretation and application of tax treatiesChyba! Záložka není definována.
1.2.5. Implications of BEPS project on the tax treatiesChyba! Záložka není definována.
1.2.6. Prospects of Multilateral Conventions Chyba! Záložka není definována.
1.2.7. In depth analyses of the tax treaties concluded between the CEE countries and
developing countries Chyba! Záložka není definována.
1.3. Findings and Conclusions Chyba! Záložka není definována.
1.3.1. Conclusions on the tax treaty framework Chyba! Záložka není definována.
1.3.2. Conclusions the evolution and development of the Model Tax ConventionsChyba! Záložka není
1.3.3. Conclusions on analyses of the process of tax treaty negotiation and possible
mistakes or errors Chyba! Záložka není definována.
1.3.4. Conclusions on specifics of tax treaty interpretation and applicationChyba! Záložka není defino*
1.3.5. Conclusions Implications of BEPS project on the tax treatiesChyba! Záložka není definována.
1.3.6. Conclusions on Prospects of Multilateral ConventionsChyba! Záložka není definována.
1.3.7. Conclusions and findings on the in depth analyses of the tax treaties concluded
between the CEE countries and developing countries.Chyba! Záložka není definována.
2. Conceptual Background Chyba! Záložka není definována.
2.1. Tax Treaties as element of international tax frameworkChyba! Záložka není definována.
2.2. Types and categories of tax treaties Chyba! Záložka není definována.
2.2.1. Types of tax treaties and their categorization Chyba! Záložka není definována.
2.2.2. Types of tax treaties based on the number of contracting partiesChyba! Záložka není definoví
2.3. Tax Treaties as a source of law and interaction of tax treaties and the domestic lawChyba! Záložka
2.3.1. Tax Treaties as a source of international law. Chyba! Záložka není definována.
2.3.2. Interaction of the domestic law and tax treaties as sources of lawChyba! Záložka není definov
2.3.3. Incorporation of Tax Treaties into domestic law and treaty overrideChyba! Záložka není defir
2.4. Format and structure of a tax treaty Chyba! Záložka není definována.
2.4.1. Title and preamble Chyba! Záložka není definována.
2.4.2. Provisions regulating the scope of the tax treatyChyba! Záložka není definována.
2.4.3. Provisions containing the key definitions Chyba! Záložka není definována.
2.4.4. Provisions containing allocation rules for taxation of incomeChyba! Záložka není definována
2.4.5. Provisions containing allocation rule for taxation of capitalChyba! Záložka není definována.
2.4.6. Provisions containing rules for elimination of double taxationChyba! Záložka není definován
2.4.7. Special provisions Chyba! Záložka není definována.
2.4.8. Final provisions Chyba! Záložka není definována.
2.4.9. Structure and form of the OECD and U N Model tax conventions comparedChyba! Záložka ne
2.5. OECD MTC and the Commentaries to the OECD MTCChyba! Záložka není definována.
2.5.1. Practical impact of OECD Model Tax ConventionChyba! Záložka není definována.
2.5.2. Relevance of Commentaries to the OECD ModelChyba! Záložka není definována.
2.6. U N MTC and Commentary to the U N MTC Chyba! Záložka není definována.
2.7. Other specific treaty models Chyba! Záložka není definována.
2.7.1. Model Convention of South African Development CommunityChyba! Záložka není definována
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
2.7.2. The US MTC Chyba!
2.7.3. The Dutch MTC Chyba!
2.7.4. The ASEAN MTC Chyba!
2.8. European Union law and international taxation....Chyba!
2.8.1. Introduction to the basics of E U law Chyba!
2.8.2. Tax Harmonization and allocation of taxing rightsChyba! Záložka není definována.
2.9. Why Tax Treaties pose risk to tax revenues? Chyba! Záložka není definována.
2.10. Findings and Conclusions Chyba! Záložka není definována.
3. Evolution and development of the Model Tax ConventionsChyba! Záložka není definována.
3.1. Introduction Chyba! Záložka není definována.
3.2. Work under the League of Nations Chyba! Záložka není definována.
3.2.1. The Report of the Four Economists Chyba! Záložka není definována.
3.2.2. The 1925 Double Taxation and Tax Evasion Report and ResolutionsChyba! Záložka není define
3.2.3. The 1927 report of the Committee of the Technical Exerts - Formulation of the
First Model Agreements Chyba! Záložka není definována.
3.2.4. The 1928 General Meeting of Government Experts on Double Taxation and Tax
Evasion Chyba! Záložka není definována.
3.2.5. Report to the Council on the Work of the First Session of the CommitteeChyba! Záložka není dt
3.2.6. Report to the Council on the Work of the Second Session of the CommitteeChyba! Záložka není
3.2.7. Report to the Council on the Work of the Third Session of the CommitteeChyba! Záložka není d
3.2.8. Report to the Council on the Fourth Session of the CommitteeChyba! Záložka není definována.
3.2.9. Report to the Council on the Fifth Session of the Committee DocumentChyba! Záložka není def
3.2.10. Report to the Council on the Seventh Session of the CommitteeChyba! Záložka není definovár
3.2.11. Report to the Council on the Work of the Eight Session of the CommitteeChyba! Záložka není
3.2.12. Report to the Council on the Work of the Ninth Session of the CommitteeChyba! Záložka není
3.2.12. The Mexico and London Models and the final report on the Work of the Tenth
Session of the Committee Chyba! Záložka není definována.
3.3. Work of the G20 and OECD Chyba! Záložka není definována.
3.3.1. Early stage of work and formulation of the OECD Model Tax ConventionChyba! Záložka není (
3.3.2. Support of G20 to the OECD's work on Tax TransparencyChyba! Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
3.3.3. G20/OECD BEPS Project Chyba!
3.4. Work of the U N Group of Experts Chyba!
3.5. Findings and Conclusions Chyba!
Important considerations for tax treaty negotiation Chyba!
4.1. Introduction Chyba!
4.2. Allocation of taxing rights explained Chyba!
4.2.1. Allocation of exclusive taxing right to the country of residenceChyba! Záložka není definována
4.2.2. Allocation of exclusive taxing right to the country of sourceChyba! Záložka není definována.
4.2.3. Shared taxing right - permitting country of source to levy taxChyba! Záložka není definována.
4.3. Key steps in negotiation of tax treaties Chyba! Záložka není definována.
4.4. Use of Model Tax Convention is Tax Treaty NegotiationChyba! Záložka není definována.
4.5. Specifics of Tax Treaty Negotiations Chyba! Záložka není definována.
4.6. Examples of Tactics and mistakes made in tax treaty negotiationChyba! Záložka není definována.
4.6.1. Example from Mongolia - Netherlands tax treatyChyba! Záložka není definována.
4.6.2. Example of Belgium - Rwanda Tax Treaty Chyba! Záložka není definována.
4.7. Making the best of tax treaties in the context of co-operation between revenue
authorities Chyba! Záložka není definována.
4.7.1. Exchange of information Chyba! Záložka není definována.
4.7.2. Co-operation in the enforcement of tax liabilities/assistance in the collection of
taxes Chyba! Záložka není definována.
4.8. Using the tax treaties to prevent and resolve disputesChyba! Záložka není definována.
4.8.1. Introduction Chyba! Záložka není definována.
4.8.2. Competent authority/mutual agreement proceduresChyba! Záložka není definována.
4.8.3. Arbitration as an alternative means of resolving international tax disputesChyba! Záložka není d
4.9. Implications of concluding tax treaty with certain jurisdictionsChyba! Záložka není definována.
4.10. Findings and Conclusions Chyba! Záložka není definována.
Selected issues in interpretation and application of double tax treatiesChyba! Záložka není definována
5.1. Principles of Tax Treaty Interpretation Chyba! Záložka není definována.
5.1.1. Need for interpretation and differences in interpretation of tax treaties and
domestic law Chyba! Záložka není definována.
5.1.2. Vienna Convention on the Law of Treaties Chyba! Záložka není definována.
5.1.3. Use of external aids for interpretation - the status and use of the OECD and U N
Commentaries Chyba! Záložka není definována.
5.1.4. Application of Art. 3(2) OECD MTC Chyba! Záložka není definována.
5.1.5. Resolving interpretation issues by competent authority proceedings - Art. 25(3)
OECD MTC Chyba! Záložka není definována.
5.2. Interpretation and application of the key tax treaty provisions related to scope of the
tax treaty Chyba! Záložka není definována.
5.2.1. Personal scope Chyba! Záložka není definována.
5.2.2. Material scope Chyba! Záložka není definována.
5.2.3. Example of the interpretation issues in relation to the personal scope of the tax
treaty or real life case Chyba! Záložka není definována.
5.3. Interpretation and application of key definitional provisionsChyba! Záložka není definována.
5.3.1. Introduction Chyba! Záložka není definována.
5.3.2. General definitions Chyba! Záložka není definována.
5.3.3. Definition of the term "resident" and resolution of cases of dual residence - Art. 4
OECD MTC Chyba! Záložka není definována.
5.3.4. Permanent establishment concept: determining the existence of a permanent
establishment - Art. 5 OECD MTC Chyba! Záložka není definována.
5.4. Interpretation and application of tax treaty provisions in relation to entrepreneurial
activities Chyba! Záložka není definována.
5.4.1. Introduction Chyba! Záložka není definována.
5.4.2. Business profits (with or without a permanent establishment)Chyba! Záložka není definována.
5.4.3. Independent Personal Services Chyba! Záložka není definována.
5.4.4. Shipping and air transport profits Chyba! Záložka není definována.
5.4.5. Other - Services, Management and technical FeesChyba! Záložka není definována.
5.4.6. Example of tax treaty application on a specific case in relation to technical feesChyba! Záložka r
5.5. Interpretation and application of Article 9 in the context of Transfer PricingChyba! Záložka není def
5.5.1. Introduction Chyba! Záložka není definována.
5.5.2. Applicable tax treaty provisions addressing the primary adjustmentChyba! Záložka není definov
5.5.3. Elimination of double taxation through Secondary adjustmentChyba! Záložka není definována.
5.6. Interpretation and application of the tax treaty provisions relating to individualsChyba! Záložka není
5.6.1. Income from Employment Chyba
5.6.2. Director's fees Chyba
5.6.3. Income of sportsman and artists Chyba
5.6.4. Pensions Chyba
5.6.5. Government Service Chyba
5.6.6. Income of Students Chyba
5.6.7. Other Income Chyba
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
5.7. Interpretation and application of provisions related to investment income and gainsChyba! Záložka n
5.7.1. Income from immovable property Chyba! Záložka není definována.
5.7.2. Dividends Chyba! Záložka není definována.
5.7.3. Interest Chyba! Záložka není definována.
5.7.4. Royalties Chyba! Záložka není definována.
5.7.5. Capital gains Chyba! Záložka není definována.
5.8. Interpretation and application of methods for elimination of double taxationChyba! Záložka není def
5.8.1. Introduction Chyba! Záložka není definována.
5.8.2. Elimination of double taxation based on domestic lawChyba! Záložka není definována.
5.8.3. Elimination of double taxation based on tax treatiesChyba! Záložka není definována.
5.9. Interpretation and application of the non-discrimination principleChyba! Záložka není definována.
5.9.1. Explanation of principles Chyba! Záložka není definována.
5.9.2. Example of application of non-discrimination rule on specific caseChyba! Záložka není definov
5.10. Interpretation and application of tax treaties in the context of tax treaty abuseChyba! Záložka není c
5.10.1. Drawing lines between tax avoidance, tax planning and tax evasionChyba! Záložka není define
5.10.2. Explaining the Tax Treaty Abuse Chyba! Záložka není definována.
5.10.3. Approaches to combat the Tax Treaties AbuseChyba! Záložka není definována.
5.10.4. Limitation of benefit provisions Chyba! Záložka není definována.
5.11. Findings and Conclusions Chyba! Záložka není definována.
6. Recent developments with respect to the model tax treaties and impact of BEPS projectChyba! Záložka n
6.1. Overview of Base Erosion and Profit Shifting (BEPS) projectChyba! Záložka není definována.
6.1.1. Introduction Chyba! Záložka není definována.
6.1.2. Overview of the BEPS Actions Chyba! Záložka není definována.
6.2. BEPS Action 6 - Preventing the Granting of Treaty Benefits in Inappropriate
Circumstances Chyba! Záložka není definována.
6.2.1. Introduction Chyba! Záložka není definována.
6.2.2. New general treaty-based anti-abuse rules Chyba! Záložka není definována.
6.2.3. Introduction of special treaty-based anti-avoidance rulesChyba! Záložka není definována.
6.2.4. Other measures preventing tax avoidance and circumvention of domestic antiabuse
laws by taking advantage of tax treaties Chyba! Záložka není definována.
6.3. Action 7 - Preventing the Artificial Avoidance of Permanent Establishment StatusChyba! Záložka ne
6.3.1. Introduction Chyba! Záložka není definována.
6.3.2. Artificial avoidance of PE status through commissionaire arrangements and other
similar strategies Chyba! Záložka není definována.
6.3.3. Artificial avoidance of PE status through the specific activity exemptionsChyba! Záložka není d
6.3.4. Splitting up of contracts Chyba! Záložka není definována.
6.4. Conclusions and Finding Chyba! Záložka není definována.
7. Multilateral Tax Treaty Chyba! Záložka není definována.
7.1. Overview of multilateral tax instruments Chyba! Záložka není definována.
7.2. Formation of new multilateral tax treaty - Multilateral InstrumentChyba! Záložka není definována.
7.2.1. Origin of the idea - Action 15 - the initiative for development of MLI under BEPS
initiative Chyba! Záložka není definována.
7.2.2. Overview and structure of MLI Chyba! Záložka není definována.
7.2.3. Operation of MLI Chyba! Záložka není definována.
7.3. Findings and Conclusions Chyba! Záložka není definována.
8. Tax Treaties concluded between developing and developed countries in the context of
Central Europe Chyba! Záložka není definována.
8.1. Introduction Chyba! Záložka není definována.
8.2. Guide to the simplified Color Maps Chyba! Záložka není definována.
8.3. Country Chapter - Czech Republic Chyba! Záložka není definována.
8.3.1. Introduction Chyba! Záložka není definována.
8.3.2. Tax Treaty Network of the Czech Republic ..Chyba! Záložka není definována.
8.3.3. Selected Tax Treaties subject to the analysis.Chyba! Záložka není definována.
8.3.4. Highlights of the key issues in Tax Treaty Network of the Czech RepublicChyba! Záložka nei
8.3.5. Conclusions and Recommendations Chyba
8.4. Country Chapter - Poland Chyba
8.4.1.
8.4.2.
8.4.3.
8.4.4.
8.4.5.
Introduction Chyba
Tax Treaty Network of Poland Chyba
Analysis of selected tax treaties Chyba
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Highlights of the key issues in Tax Treaty Network of PolandChyba! Záložka není definován
Conclusions and Recommendations Chyba
8.5. Country Chapter - Slovakia Chyba
Introduction Chyba
Tax Treaty Network of Slovakia Chyba
Selected Tax Treaties subject to the analysis.Chyba
8.5.1.
8.5.2.
8.5.3.
8.5.4.
8.5.5.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Highlights of the key issues in Tax Treaty Network of SlovakiaChyba! Záložka není definová
Conclusions and Recommendations Chyba
8.6. Country Chapter - Slovenia Chyba
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
8.6.1. Introduction Chyba!
8.6.2. Tax Treaty Network of Slovenia Chyba!
8.6.3. Selected Tax Treaties subject to the analysis.Chyba!
8.6.4. Highlights of the key issues in Tax Treaty Network of SloveniaChyba! Záložka není definová
8.6.5. Conclusions and Recommendations Chyba! Záložka není definována.
8.7. General Findings and Conclusions Chyba! Záložka není definována.
8.7.1. Limited tax treaties with developing countriesChyba! Záložka není definována.
8.7.2. Lack of obvious and intentionally harmful practicesChyba! Záložka není definována.
8.7.3. Inconsistency in tax treaty negotiation practiceChyba! Záložka není definována.
8.7.4. Shift towards the OECD MTC Chyba
8.8. Specific Findings and Conclusions Chyba
8.8.1.
8.8.2.
8.8.3.
8.8.4.
8.8.5.
8.8.6.
8.8.7.
8.8.8.
8.8.9.
8.8.10.
Business Profits taxation Chyba
Permanent Establishment issues Chyba
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Taxation of income from provision of services and Technical Service FeesChyba! Záložka nei
Taxation of international transport Chyba!
Taxation of dividends Chyba!
Taxation of Interest Chyba!
Taxation of Royalties Chyba!
Taxation of Capital Gains Chyba!
Taxation of Director's fees Chyba!
Other Income Chyba!
8.9. Overall Findings and Conclusions Chyba!
9. Annexes Chyba!
9.1. Annex 1. Comparative table - OECD 2017, U N 2011 and SADC 201 IChyba! Záložka není define
9.2. Annex 2 Comparison of selected articles in the U.S. MTC 2016 and the OECD
MTC 2017 Chyba! Záložka není definována.
9.3. Annex 3. Comparison of the draft Conventions for the Prevention of Double
Taxation in the Special Matter of Direct Taxes Chyba! Záložka není definována.
9.4. Annex 4. Comparative table of the Mexico and London Income Tax ModelsChyba! Záložka není <
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
Záložka není definována.
5. Bibliography
Articles and books
1. A.AlstadsEeter, M. Jacob, The effect of awareness and incentives on tax evasion, WP
13/14, Oxford University Center for Business Taxation, 2013.
2. P.Baker, "Improper Use of Tax Treaties, Tax Avoidance and Tax Evasion", Paper No.
9-A May 2013
3. T.Balco, X,Yeroshenko, ch. 11 "How Are We Doing with BEPS Recommendations in
the EU?" in S.A.Rocha and A,Christians, Tax Sovereignty in the BEPS Era, p.250, Kluwer
Law International 2017.
4. T.Balco, X.Yeroshenko, The relationship between international tax law and the
domestic legal order: the case of Kazakhstan, European Tax Studies, 2015
5. T.Balco, Note on selected treaty issues in relation to extractive industries, Policy
Research Center, 2015, ISBN:978-80-87909-0
6. T.Balco, X.Yeroshenko, Ch.6 "Tax planning, tax avoidance and tax evasion Introduction
to the topic" in Taxes and Corporate Tax Burden, Policy Research Center, 2015
7. T.Balco, Risk and Benefits of Concluding Comprehensive Tax Treaties with Hong
Kong for Developing Countries. In Julien Chaisse, Michael Lang. International Taxation:
Law and Practice in Hong Kong and China. Hong Kong: Wolters Kluwer Hong Kong
Limited, 2015. s. 247-265, 19 s. International Taxation: Law and Practice in Hong Kong and
China.
8. T.Balco, Kazakhstan: The Oriflame Case - Beneficial Ownership in Sub-Licence
Arrangements. In Kemmeren et al. Tax Treaty Case Law around the Globe 2014.
Amsterdam, Netherlands: IBFD, 2014. s. 151-158, 8 s. Tax Treaty Case Law around the
Globe 2014.
9. T.Balco, "Kazakhstan: NWKC Case." In M.Lang (et.al) Tax Treaty Case Law around
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2. Policy Research Center, Policy Brief: Tax Treaties - what are the issues?, 2017,
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Agreement Procedures (MAPs) under the Arbitration Convention at the End of 2015
5. OECD (2015), Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 -
2015 Final Report, OECD Publishing, Paris
6. OECD (2015), Limiting Base Erosion Involving Interest Deductions and Other
Financial Payments, Action 4-2015 Final Report, OECD Publishing, Paris
7. OECD, Preventing the Granting of Treaty Benefits in Inappropriate Circumstances,
Action 6—2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project (Paris:
OECD, 2015)
8. OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into
Account Transparency and Substance, Action 5-2015 Final Report, OECD Publishing, Paris
9. OECD (2015), Preventing the Artificial Avoidance of Permanent Establishment
Status, Action 7-2015 Final Report, OECD Publishing, Paris
10. OECD (2015), Aligning Transfer Pricing Outcomes with Value Creation, Actions 8-
10-2015 Final Reports, OECD Publishing, Paris
11. OECD (2015), Transfer Pricing Documentation and Country-by-Country Reporting,
Action 13-2015 Final Report, OECD Publishing, Paris,
12. OECD (2015), Making Dispute Resolution Mechanisms More Effective, Action 14 -
2015 Final Report, OECD Publishing, Paris
13. OECD (2015), Developing a Multilateral Instrument to Modify Bilateral Tax Treaties,
Action 15-2015 Final Report, OECD Publishing, Paris
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associated companies of different Member States, 11 November 2011.
17. Bulletin Concerning Certain Issues Related to Taxation of Non-resident Enterprises SAT
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22. Recommendation of the council concerning the elimination of double taxation
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23. Second report by the fiscal committee to the council (Note by the Secretary of the
Council). (C(59)147) of 18 June 1959
24. Third report of the fiscal committee to the council (Note by the Secretary of the
council). (C(60)157) of 13 July 1960
25. Fourth report of the fiscal committee (Note by the Secretary of the council). (C(61)97)
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26. Report on the Work of the Tenth Session of the Committee registered as Leagueof
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27. Report to the Council on the Work of the Ninth Session of the Fiscal Committee.
28. Registered as League of Nations document C.181.M.110.1939.II.A
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registered as League of Nations Document C.384.M.229.1938.II.A
30. Report Report to the Council on the Seventh Session of the Fiscal Committee,
registered as document of League of Nations, C.490.M.331.1937.II.A
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34. Report to the Council on the Work of the Third Session of the Committee registered
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35. Report to the Council on the Work of the Second Session of the Committee registered
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36. Report to the Council on the Work of the First Session of the Committee registered as
League of Nations document C516.M. 175.1929.11
37. Report Presented by the General Meeting of Government Experts on Double Taxation
and Tax Evasion registered as League of Nations Document C.562.M. 178.1928.11.
38. Report of the Committee of Technical Experts on Double Taxation and Tax Evasion
registered as League of Nations document C. 216. M . 85 dated in London on April 12th, 1927
39. League of Nations: Technical Experts to the Economic and Financial Committee
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Experts to the Financial Committee Document F.212, Geneva, February 1925
40. Report by the Experts on Double Taxation registered as League of Nations Document
E.F.S.73. F.19; April 5, 1923
Court cases
1. Lin v. Commissioner of Inland Revenue, CIV-2015-404-2267; [2017] NZHC 969,
Decision 12 May 2017, High Court of New Zealand
2. Case no. 6S 34/2016 decided by the Regional Court of Slovakia on 3 May 2017.
3. Tech Mahindra Limited v. Commissioner of Taxation, [2016] FCAFC 130 Decision
of 22 September 2016 Federal Court of Australia
4. Case No. 2C_752/2014 decided by the Federal Supreme Court of Switzerland on 27
November 2015
5. See case FCE Bank pic v. Commissioners for Her Majesty's Revenue and Customs,
no. [2012] EWCA Civ 1290, decided on 17 October 2012 by the Court of Appeal of England
and Wales.
6. Knights of Columbus v. Her Majesty the Queen, Tax Court of Canada, 2008
CarswellNat 1507, 2008 TCC 307
7. Judgement of 8 November 2007, Amurta, C-379/05, ECLI:EU:C:2007:655.
8. SNC Lavalin/ Acres Inc. v. ACIT, ITA Nos. 192 & 206/Del/2005, 30 March 2007,
Income Tax Appellate Tribunal Delhi
9. Boake Allen Limited and others v. H M Revenue and Customs, 23 May 2007
10. Indofood International Finance Limited v. JPMorgan Chase Bank NA, A3/2005/2497,
Court of Appeal of England and Wales, decision of 2 March 2006
11. Case no. No. 5 Afs 42/2005-102 decided on 30 November 2006 by the Nejvyšší
Správní Soud (Supreme Administrative Court of the Czech Republic)
12. Case no.2Afs 108/2004-106 decided on 10 February 2006 by the Nejvyšší Správní
Soud (Supreme Administrative Court of the Czech Republic)
13. Case no. 2Afs 108/2004-106 decided by the Supreme Administrative Court of the
Czech Republic on 10 February 2005
14. Serrmoah Shipping BV v. Assistant Commissioner of Income Tax, 28 May 2004,
Income Tax Appellate Tribunal Mumbai
15. NEC Semi-Conductors Ltd v. Commissioners of Inland Revenue, 24 November 2003
16. Case no. 37.024 decided on 21 February 2003 by the Supreme Court of the
Netherlands.
17. Judgement of 17 October 1996, Denkavit, C-283/94, C-291/94 and C-292/94,
ECLI:EU:C: 1996:387.
18. Case C-264/96 Imperial Chemical Industries pic (ICI) v Kenneth Hall Colmer [1998]
ECR1-4695
19. Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338, Hight Court of
Australia.
20. Whitney v. Robertson, 124 U.S. 190 (1888)
21. Conseil d'Etat, 31 July 2009, Decision No. 296471, Overseas Thoroughbred Racing
Stud Farms Ltd, RJF 11/09 n° 979
22. NWKC LLC vs. Tax Committee of the Republic of Kazakhstan, No. Decision 3r-
2122-12 issued on 15 March 2012 by the Supreme Court of Kazakhstan.
Legislation and international agreements
1. OECD Multilateral Convention to implement tax treaty related measures to prevent
base erosion and profit shifting, adopted on 24 November 2016 and signed on 7 June 2017
2. The Code of the Republic of Kazakhstan dated 25 December 2017 No. N° 120-VI
3. Council Directive 2016/1164 of 20 June 2016 laying down rules against tax avoidance
practices that directly affect the functioning of the internal market
4. Agreement between the Slovak Republic and the United Arab Emirates for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income dated 21 December 2015
5. Convention between the Republic of Poland and the Federal Democratic Republic of
Ethiopia for the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income dated 13 May 2015
6. Council Directive (EU) 2015/121 of 27 January 2015 amending Directive
2011/96/EU on the common system of taxation applicable in the case of parent companies
and subsidiaries of different Member States
7. Council Directive 2014/86/EU of 8 July 2014 amending Directive 2011/96/EU on the
common system of taxation applicable in the case of parent companies and subsidiaries of
different Member States
8. Council Implementing Regulation (EU) No. 1042/2013 of 7 October 2013.
9. Convention between the Republic of Kosovo and the Republic of Slovenia for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital dated 26 June 2013
10. Treaty on the Functioning of the European Union (TFEU), Official Journal C 326,
26/10/2012 "
11. Decision of Mongolian parliament issued on 2 November 2012 on termination of
several tax treaties.
12. Agreement between the Ministry of Finance of the Slovak Republic and the Ministry
of Finance of the Republic of China (Taiwan) for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income, concluded on 10 August 2011
13. Convention between the Kingdom of the Netherlands and Japan for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on income dated 25
August 2010
14. Council Directive 2009/133/EC of 19 October 2009 on the common system of
taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges
of shares concerning companies of different Member States and to the transfer of the
registered office of an SE or SCE between Member States
15. Law No. 200 of 16th November 2009 of the Republic of Kazakhstan Concerning the
Introduction of Amendments and Additions to Certain Legislative Acts of the Republic of
Kazakhstan on Issues of Taxation.
16. Agreement between the Slovak Republic and the Republic of Macedonia for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital dated 5 October 2009
17. Agreement between the Government of the Slovak Republic and the Government of
the Socialist Republic of Vietnam for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income dated 27 October 2008
18. Law N. 99 of 10th December 2008 on the Taxes and other obligatory payment to the
buddget as amended (Tax Code of Kazakhstan)
19. Convention between the Government of the Republic of Slovenia and the Council of
Ministers of the Republic of Albania for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income and on capital dated 27 February 2008
20. Convention between the Kingdom of Belgium and the Republic of Rwanda for the
avoidance of double taxation and the prevention of tax fraud and fiscal evasion with respect
to taxes on income and on capital dated 16 April 2007
21. Agreement between the Czech Republic and Bosnia and Herzegovina for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital, dated 20 November 2007
22. Convention between the Czech Republic and the Federal Democratic Republic of
Ethiopia for the avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income dated 25 July 2007
23. Agreement between the government of the Czech Republic and the executive
authority of Georgia for the avoidance of double taxation and the prevention of fiscal evasion
with respect to taxes on income and on capital dated 23 May 2006
24. Convention between the Republic of Slovenia and Bosnia and Herzegovina for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital dated 16 May 2006
25. Convention between the Government of the Republic of Slovenia and the
Government of the Republic of Moldova for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital dated 31 May
2006
26. Law No. 107 of 23rd December 2005 of the Republic of Kazakhstan Concerning the
Introduction of Amendments and Additions to Certain Legislative Acts of the Republic of
Kazakhstan Concerning Issues of Licensing and Consolidated Supervision.
27. Law on Direct Taxes on Income no 16 of 2005 as amended
28. Council Directive 2005/19/EC of 17 February 2005 amending Directive 90/434/EEC
1990 on the common system of taxation applicable to mergers, divisions, transfers of assets
and exchanges of shares concerning companies of different Member States
29. Convention between the Council of Ministers of Serbia and Montenegro and the
Government of the Czech Republic for the avoidance of double taxation with respect to taxes
on income and on capital dated 11 November 2004
30. Convention between the Government of the Republic of Slovenia and the
Government of the Republic of India for the avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income dated 13 January 2003
31. Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation
applicable to interest and royalty payments made between associated companies of different
Member States
32. Income Tax Act of the Slovak Republic - Law 595/2003 Coll
33. Convention between the Government of the Republic of Slovenia and the Council of
Ministers of Serbia and Montenegro for the avoidance of double taxation with respect to
taxes on income and on capital dated 11 June 2003
34. Convention between the Government of the Kingdom of Thailand and the
Government of the Republic of Slovenia for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income dated 11 July 2003
35. Agreement between the Government of the Kingdom of the Netherlands and the
Government of the Republic of Indonesia for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income dated 29 January 2002
36. Convention between the Republic of Austria and the Federal Republic of Germany for
the avoidance of double taxation with respect to taxes on income and on capital and to trade
tax and land tax, dated 24 August 2000.
37. Protocol to the Convention between the Republic of Austria and the Federal Republic
of Germany for the avoidance of double taxation with respect to taxes on income and on
capital and to trade tax and land tax, dated 24 August 2000
38. Convention between the Slovak Republic and the Federal Republic of Yugoslavia for
the avoidance of double taxation with respect to taxes on income and on capital dated 26
February 2001
39. Law N.209 of 12 June 2001 on Taxes and other obligatory payment to the budget
(Tax Code of Kazakhstan, repealed in 2008)
40. Agreement between the Government of the Slovak Republic and the Government of
the Republic of Indonesia for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income dated 12 October 2000
41. Constitution of the Czech Republic, No. 1/1993 Coll adopted on 16 December 1992
as amended
42. Convention between Nigeria and Poland for the avoidance of double taxation dated 12
February 1999
43. Convention between the Czech Republic and the Republic of Moldova for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and on property dated 12 may 1999
44. Convention between the Republic of Slovenia and the Republic of Macedonia for the
avoidance of double taxation with respect to taxes on income and on capital dated 15 May
1998
45. Agreement between the Government of Mongolia and the Government of the
Republic of Poland for the avoidance of double taxation and the prevention of fiscal evasion
with respect to taxes on income and on capital dated 18 April 1997
46. Convention between the Government of the Republic of Poland and the Government
of the People's Republic of Bangladesh for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income dated 8 July 1997
47. Agreement between the Government of the Czech Republic and the Government of
the Socialist Republic of Vietnam for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income and on capital dated 23 May 1997
48. Agreement between the Czech Republic and Mongolia for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income and on capital
dated 27 February 1997
49. Convention between the Kingdom of the Netherlands and the Republic of Kazakhstan
for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes
on income and on capital dated 24 April 1996
50. Nordic Countries for the avoidance of double taxation with respect to taxes on income
and on capital of 23 September 1996
51. Agreement between the government of the republic of Poland and the government of
the republic of Zambia for the avoidance of double taxation with respect to taxes on income,
on capital and on capital gains dated 19 May 1995
52. Agreement between the government of the Republic of Poland and the Government of
the Socialist Republic of Vietnam for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income dated 31 August 1994
53. Convention between the Republic of Hungary and the Republic of Kazakhstan for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income and on capital dated 7 december 1994
54. The Convention Between the Government of the Republic of Kazakhstan and the
Government of the United States for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes On Income and Capital as signed on October 24, 1993
55. Agreement between the Government of the Republic of Zimbabwe and the
Government of the Republic of Poland for the avoidance of double taxation with respect to
taxes on income, capital and capital gains dated 9 July 1993
56. Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation
applicable in the case of parent companies and subsidiaries of different Member States
57. Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation
applicable to mergers, divisions, transfers of assets and exchanges of shares concerning
companies of different Member States
58. OJ L 225/15 of 20.08.90, Convention 90/463/EEC (EU Arbitration Convention)
59. Agreement between the Government of the Czechoslovak Socialist Republic and the
Government of the Federal Republic of Nigeria for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital gains dated 31
August 1989
60. Agreement between the Government of the Czechoslovak Socialist Republic and the
Government of the Federal Republic of Nigeria for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital gains dated 31
August 1989
61. Convention between the Republic of South Africa and the Slovak Republic for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on
income dated 28 May 1988
62. Agreement between the Government of India and the Government of the
Czechoslovak Socialist Republic for the avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income dated 27 January 1986
63. UN Convention against Torture (1984)
64. Convention between the Government of the Democratic Socialist Republic of Sri
Lanka and the Government of the Polish People's Republic for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income and capital
dated 25 April 1980
65. Convention between the Government of the Republic of Sri Lanka and the
Government of the Czechoslovak Socialist Republic for the avoidance of double taxation and
the prevention of fiscal evasion with respect to taxes on income and property dated 26 July
1978
66. Convention between the Republic of Austria and the Czechoslovak Socialist Republic
for the avoidance of double taxation with respect to taxes on income and on capital dated 7
March 1978.
67. CMEA (COMECON) Multilateral Convention with respect to the avoidance of
double taxation on income and net wealth of individuals of 27 May 1977
68. Vienna Convention on the law of treaties dated 23 May 1969
69. ASEAN Declaration (Bangkok Declaration) Bangkok dated 8 August 1967
70. Directives 67/227/EEC and 67/228/EEC dated 11 April 1967
71. Vienna Convention on Consular Relations dated 24 April 1963
72. Vienna Convention on Diplomatic Relations dated 18 April 1961
73. Convention on the Organisation for Economic Co-operation and Development dated
14 December 1960
74. Treaty of Rome, 1957
75. Geneva Conventions (1949)
76. Genocide Convention (1948)
77. Convention between the United States of America and Sweden, dated March 23rd,
1939
78. Convention between Denmark and Iceland, dated January 24th, 1939, regarding
double taxation in the matter of taxes on income and on property.
79. Agreement between the Union of South Africa and Southern Rhodesia dated January
10th, 1939
80. Arrangement between the Ministries of Finance and the Interior of Denmark on the
one hand and the Ministry of Finance of Germany on the other hand, dated December 16th,
1938, for the prevention of double taxation in respect of taxes on income and property
81. Convention between Hungary and Roumania, dated October 28th, 1937, for the
prevention of double taxation in the matter of direct taxes
82. Convention between Denmark and Finland signed on December 2nd, 1937
83. Convention between Iceland and Sweden, concluded on September 8th, 1937
84. Convention between the United Kingdom of Great Britain and Northern Ireland and
the Netherlands, concluded on August 27th, 1936
85. Convention between the United Kingdom of Great Britain and Northern Ireland and
Greece, concluded on September 17th, 1936
86. Convention between the United States of America and Belgium, concluded on
January 28th, 1936
87. Convention between France and the United Kingdom concluded on April 9th, 1935
88. Convention between Finland and Sweden concluded on March 16th, 1931
89. Convention between France and Belgium concluded on May 16th, 1931
90. Netherlands Law of June 14th, 1930
91. Convention for the avoidance of double taxation and the settlement of other fiscal
questions between France and Italy concluded on June 16th, 1930
92. Agreement between the Free City of Danzig and Poland signed at Danzig on May
29th, 1929
93. Yugoslav Law of February 8th, 1928
94. Treaty between Austria and Czechoslovakia concluded on July 12th, 1926.
95. 21 June 1899 between Austria-Hungary and Prussia for the avoidance of double
taxation which can result from the application of the tax laws
96. Treaty of 16 April 1869 regarding direct taxes
Other sources
1. OECD Model Tax Convention 2017
2. UN (2017), UN Practical Mannual on Transfer Pricing for developing countries,
2017.
3. U N Economic and Social Council resolution E/2018/9/Add. 1, dated 10 August 2017
4. United States Model Income Tax Convention for the avoidance of double taxation and
the prevention of tax evasion with respect to taxes on income, 2016
5. UN Doc. E/C.18/2016/CRP.1, Committee of Experts on International Cooperation in
Tax Matters Seventh session dated 11-14 October 2016
6. OECD Model Tax Convention 2014
7. UN Economic and Social Council resolution E/2013/9/Add. 10, dated 28 June 2013
8. UN Model Tax Convention 2011
9. South African Development Community Model Tax Agreement for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income,
2011
10. Ministry of Finance of the Netherlads, Memorandum on Dutch Tax Treaty Policy
2011, Summary
11. Revised Code of Conduct for the effective implementation of the Convention on the
elimination of double taxation in connection with the adjustment of profits of associated
enterprises (2009/C 322/01), OJ C 322/1 of 30.12.2009
12. ECOSOC Resolution 2006/48 dated 28 July 2006
13. Andean Community Income and Capital Tax Convention, 2004
14. UN Manual for the negotiation of bilateral tax treaties between developed and
developing countries, UN 2003
15. SADC Memorandum of understanding on co-operation in taxation and related
matters, dated 8 August 2002
16. OECD Model Agreement on exchange of information on tax matters, available at:
https://www.oecd.org/ctp/harmful/2082215.pdf
17. Nederlands Standaardverdrag (NSV), 1987
18. ASEAN Model Tax Convention 1987
19. UN Economic and Social Council resolution 1980/13 of 28 April 1980
20. UN Economic and Social Council resolution 2004/69 of 11 November 2004
21. UN resolution 1273 (XLIII) of 4 August 1967
22. League of Nation Model Tax Convention of 1943 (Mexico Model)
23. League of Nation Model Tax Convention of 1946 (London Model)
Websites:
1. www.ibfd.org - International Bureau of Fiscal Documentation
2. https://.worldbank.org/ - The World Bank
3. http://www.mfcr.cz/ - the Ministry of Finance of the Czech Republic
4. http://www.psp.cz - the parliament of the Czech Republic
5. https://apps.odok.cz/ - legislative portal of the government of the Czech Republic
6. http://www.mzv.cz/ - the Ministry of Foreign Affairs
7. http://trade.ec.europa.eu/ - European Commission Trade website
8. http://atlas.media.mit.edu/ - Observatory of Economic Complexity
9. http://www.nbp.pl/ - the National Bank of Poland
10. http://www.sejm.gov.pl/ - the Sejm of Poland
11. http://www.finanse.mf.gov.pl - the Ministry of Finance of Poland
12. http://www.mfsr.sk/ - the Ministry of Finance of the Slovak Republic
13. http://www.nbs.sk/sk/ - National Bank of the Slovak Republic
14. http://www.sars.gov.za - the South African Revenue Service
15. http://www.bsi.si - Bank of Slovenia