Tax Treaty Case Law around the Globe 2023

1. Introduction

The main question for the Norwegian Tax Appeal Board was whether a Norwegian taxpayer could claim a foreign tax credit in Norway for withholding tax paid in China. To be able to answer this question, it was necessary to determine whether S. 200China, under the tax treaty between China and Norway, was entitled to levy withholding tax on a payment for the delivery of ship drawings and engineering services from a Norwegian company to Chinese shipyard A (hereinafter referred to as Shipyard A). The relevant articles to consider in the tax treaty were Articles 7 Business Profits, 12 Royalties, and 22 Other Income.

The tax treaty is based on the 1977 OECD Model Tax Convention, however with some influence from the UN Model Tax Convention. Art. 12 Royalties is based on the UN Model Tax Convention which entails that the source state, in addition to the resident state, may tax the royalty payment up to 10% of the royalty payment.

The definition of “royalties” in Art. 12(3) in the treaty is similar, but not identical, to the definition in the OECD MC Art. 12 (2). See more about this in section 3.2.1. below.

The disputed foreign tax credit amounts to NOK 3,461,333 for the income tax year of 20...