Tax Treaty Case Law around the Globe 2025

1. Introduction

This case dates more than 20 years back to fiscal period 2003 which is the year prior to Slovak Republic’s joining the EU. The case involves a series of steps and transactions related to distributing dividends and applying the double tax agreement (DTA) between the Slovak Republic and the Netherlands that dated back to 1974. It was originally concluded between the predecessor state - Czechoslovak Socialistic Republic and the Kingdom of Netherlands (hereinafter referred to as the “DTA with the Netherlands”).

The DTA had a number of specific provisions that were relevant for this case - especially that of Art. 10 (3) that provided for an exemption of dividends from taxation at source. Furthermore, it did not contain the concept of beneficial ownership that was not present in the 1963 Draft Double Taxation Convention on Income and Capital but introduced into the 1977 version of the OECD Model Double Taxation Convetion on Income and Capital (OECD MTC). These and other features make this particular treaty potentially attractive for treaty shopping practices.

The tax administration in Slovakia carried out an audit in 2010 for tax year 2003. It challenged the fact that no wit...