At issue was the concept of beneficial ownership of income flowing to non-residents from sources in the Slovak Republic. The application of this concept was questionable in a situation where the relevant international treaty did not require the non-resident to be the “beneficial” owner of the source of income. In assessing the transaction under examination, the Financial Report referred to the application of the concept of beneficial ownership of income, through the Commentary on the OECD Model Agreement (“Commentary”).
The Supreme Court states that from the perspective of international law, the rules stated in the commentary are not legally binding but are adopted with the purpose of achieving the practical effect and can be transformed to legally binding if applied within the national system by the tax authorities and courts. From the perspective of national law, the OECD commentaries do not exist as standards and can only influence the interpretation of international treaties.
Under the circumstances where the legal norm has not been duly published, where there is an absence of well-established practice, where the OECD Model and commentaries are not available in the official language and where there are contradictory opinions on the binding nature of the interpretative rules it cannot be expected from the taxpayer to follow such interpretative rules, until they become part of the international tax treaty.