Tax Treaty Case Law around the Globe 2019

S. 1661. Introduction

This case, decided in the High Court of Malawi, is of interest as it challenges the legality and irrationality of applying the Organisation for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) in the course of a public function – a transfer pricing audit analysis. Malawi is a source tax jurisdiction and currently has only six double tax treaties in force (with France, the Netherlands Norway, South Africa, Switzerland and the United Kingdom). All but one of these treaties have included a shorter version of Article 9 (Associated Enterprises) of the OECD Model 2017 with some variations. South Africa is the only non-OECD member country but does have an enhanced relationship with the OECD. The fact that all of Malawi’s treaties follow the OECD model indicates that the OECD Guidelines can be relevant for the Malawian tax authorities. This was not the outcome in this particular case, for reasons which will be elaborated on in this chapter.

2. Facts of the case

Eastern Produce Malawi Limited (Eastern Produce) is a company engaged in the growing, production and processing of tea in Ma...