Tax Treaty Case Law around the Globe 2019

S. 3121. Introduction

On 15 June 2018, the Portuguese Arbitration Court (hereinafter: CAAD or Arbitration Court) delivered a ruling on the interpretation of the articles corresponding to article 17 of the OECD Model in the Brazil-Portugal Income and Capital Tax Treaty (hereinafter: Brazil-Portugal Tax Treaty) and the Portugal-UK Income and Capital Tax Treaty (hereinafter: Portugal-UK Tax Treaty).

The judgment addresses whether Portugal has taxing rights over fees paid by a Portuguese professional football club to non-resident companies for the acquisition of image rights and economic rights of professional football players.

The decision focuses on the concept of “close connection” to the performance of the sports activities and discusses at length the Commentary on Article 17 of the OECD Model on the issue (in particular, paragraphs 9.5 and 11 of the Commentary on Article 17 of the OECD Model). CAAD ultimately ruled in favour of the taxpayers (with a dissenting vote from one of the arbitrators), concluding that the recipients of the income did not qualify as star companies and therefore Portugal would not be allowed to tax the aforementioned payments pursuant to the provisions of article 7 ...