Tax Treaty Case Law around the Globe 2012

Russia: Thin Capitalization Rules and Non-Discrimination Clause

28.1. Introduction

Issues of correlation between domestic tax law and tax treaties are quite significant for very different categories of cross-border tax disputes. These issues are of special importance for disputes concerning the application of article 24 of tax treaties which usually establishes (if the relevant treaty follows the OECD or UN Model Conventions) the rule on non-discrimination. The main purpose of this provision is to limit the rights of the contracting states with regard to taxation of some categories of persons (who fall within the subjective scope of the treaty) in a more burdensome way, the inadmissible criteria being the basis for the respective differentiation.

Thus, in practice, different situations may arise connected with the estimation of the extent to which a norm of domestic law is discriminatory in nature and does not meet the requirements of article 24 of the tax treaty applicable to a particular situation. The analysis of the case law of Russian courts shows that as the most common issues that arose are those which are connected with the correlation of article 24 of the tax treaties with th...