Tax Treaty Case Law around the Globe 2017

S. 221Kazakhstan: Kazmunaiservices & Contracting Case on Technical Services and the MFN Clause

Tomas Balco/Xeniya Yeroshenko

1. S. 222Introduction

Until recently, a technical services provision was a rare provision found in the tax treaties concluded by some of the developing countries in Asia and Africa. Most of the tax treaties concluded by India and also tax treaties concluded by number of African countries, which were inspired by the South African Development Community Model use this provision in their bilateral tax treaties. However, since the Technical Services provision has now been approved as a part of the UN Model, we are likely to see an increase in the use of this provision in the newly negotiated bilateral tax treaties between developed and developing countries as well as an increase in the related issues arising there from.

This provision grants additional taxing rights to the country of source, which is permitted to levy withholding tax on payments made in return for the provision of any service of a managerial, technical or consultancy nature. The withholding tax rate however should be limited by a maximum rate established by the tax treaty and agreed through bilateral negotiations...