Tax Treaty Case Law around the Globe 2013

1. S. 231 Introduction

The issue considered in the judgment analysed in this contribution was to determine, on the facts, the relationship between Article 8 on the taxation of income from shipping and air transport and Article 11(5) on the taxation of interest under the Polish-German Tax Treaty. In accordance with Article 8, profits from the operation of ships or aircraft in international traffic shall be taxed in one of the contracting states only, i.e. in the state in which the place of effective management is situated. It should be noted that this method of treatment does not apply to all the profits of the enterprise engaged in international traffic, but only to profits arising from the operation of ships or aircraft. Shipping and air transport enterprises generally engage in different kinds of activities that, for instance, facilitate or support their core business. In light of Article 8, it is of essential importance to make a proper distinction between profits derived from the operation of a ship or aircraft and profits which do not fall into this category and are therefore subject to taxation in accordance with other provisions of the tax treaty. The commentary on Article 8 of th...