Tax Treaty Case Law around the Globe 2013

1. S. 223 Introduction

The NWKC case is a case dealing with application of tax treaties to a US LLC, which was treated as fiscally transparent entity to the United States. Despite a special provision contained in the Tax Treaty between United States and Kazakhstan, the judicial authorities of Kazakhstan (up to the supreme court) have decided in favor of tax authorities and denied the tax treaty benefits in the form of reduced branch profit tax, despite the fact that the shareholders of the US LLC provided the relevant certificates of residence and also referred to technical explanation of the IRS of the United States. The case is important for the tax treaty practice in Kazakhstan since it shows that despite the specific provision in the tax treaties, the tax treaty benefits may not be currently available to transparent entities. The case is also very interesting, since it resembles the TD Securities case decided in Canada in 2010, although with different outcomes as the current case.

2. Facts of the case

NWKC LLC is a US Limited Liability Company, which serves as joint-venture vehicle for 2 multinational companies carrying out a joint business project in O&G Services industry in Kazakhsta...