Tax Treaty Case Law around the Globe 2017

S. 209Australia: Limitations on applying the royalties Article in a digital era

Michael Dirkis

1. S. 210Introduction

The review of the scope of article 12 in two of Australia’s bilateral tax treaties by the Australian Courts came to an end in 2017 with the High Court dismissing the applications for leave to appeal against two decisions of the Full Federal Court of Australia. The first of the cases to be explored, the Full Federal Court decision in Seven Network Limited v Commissioner of Taxation [2016] FCAFC 70, dealt with the scope of the definition of royalty, while the second, the Full Federal Court decision in Tech Mahindra Limited v Commissioner of Taxation [2016] FCAFC 130, dealt with the interface between the business profits article and the royalty article.

What both cases reveal is that there are difficulties in using the concepts of royalties, developed prior to the digital era, to deal with and to resolve problems in the digital era.

2. Facts of the Case: Seven Network Limited

Between March 2006 and August 2008, Seven Network Limited (Seven), a resident of Australia, made payments totaling AUD 122,178,261 to the International Olympic Committee (IOC) for broadcasting rights to the Olympic ...