Tax Treaty Case Law around the Globe 2017

1. S. 272Introduction

The taxation of employees engaged in international air traffic has repeatedly attracted disputes in several national courts. Without doubt, this is a result of the high level of mobility of such employees and the great number of days spent outside their countries of residence. The difficulty is exacerbated by the fact that the airline whose uniform they wear during their work may often not be their formal employer, as it is a common feature of the international air traffic business that a separate legal entity is set up, which acts as employer for all personnel working for a multinational group operating through a number of local subsidiaries. This raises two questions: first, whether and under what circumstances the special rule of article 15(3) of the OECD Model, which is designed to address the taxation of employees in international air traffic, applies; and second, whether the place of residence of the formal employer has any significance for the taxation of such employees.

The case discussed in this note concerns an issue arising before the Cour administrative (hereinafter the court), Luxembourg’s highest administrative court. The case concerned the taxation of f...