Tax Treaty Case Law around the Globe 2024

22.1. Introduction

This chapter examines the Engecorps case as ruled by the Federal Court of the Third Region. The case centred on the application of article 12 (“Royalties”) of the Treaty between Brazil and Spain (DTC-BRA-SPA) to technical services that did not involve transfer of technology. Brazil generally treats technical services under the scope of article 12 through protocols. This case is significant for two reasons.

First, the case raises a fundamental question regarding the scope of article 12: does it encompass all technical and assistance services, or is it limited to those services that closely resemble the concept of royalties? According to the latter interpretation, only technical services that result in the transfer of technology would be covered by article 12. In essence, this chapter explores whether the protocol’s wording leads to a broad or narrow interpretation of the concept of royalties.

Second, the case highlights the role of article 31 of the VCLT, to which Brazil is signatory. Article 31 emphasizes that the context and ordinary meaning of treaty terms must be taken into account when interpreting a treaty. Considering the context and ordinary meaning can lead ...