Tax Treaty Case Law around the Globe 2014

S. 151Chapter 16 Kazakhstan: The Oriflame Case - Beneficial Ownership in Sub-Licence Arrangements

Tomas Balco

16.1. Introduction

Kazakhstan currently has a tax treaty network with more than 40 countries. In the case being addressed here, the countries involved were Luxembourg and the Netherlands; however, at that particular time, there was no tax treaty with Luxembourg; only the tax treaty with the Netherlands was in force.,

Kazakhstan follows the UN Model in respect of taxation of royalties and in all of its tax treaties reserves the right to tax royalties at source. The general withholding tax (WHT) rate on royalties in most tax treaties is 10%. In all of its tax treaties, Kazakhstan requires that the 10% reduced rate of WHT can apply only in the case where the recipient of the royalty is also a beneficial owner of the royalty.

The Kazakhstan Tax Code currently contains a definition of beneficial ownership in its domestic law; however, during the tax periods affected in the case, there was no domestic law provision, but rather a condition that required the payer of income (tax agent) to non-residents to apply the reduced rate of WHT under the tax treaty only if it could establish that th...