Tax Treaty Case Law around the Globe 2020

S. 161Part 5 Royalties

S. 163Chapter 15 Spain: Lease of Industrial Equipment and Supply of Know-How under the Royalty Definition in Article 12 of the OECD Model

Ricardo García Antón

15.1. Introduction

On 20 March 2019, the Spanish National Tribunal (Audiencia Nacional, or AN) assessed the treatment of several payments made to non-resident entities by Dorna Sport SL (Dorna) in 2007. Dorna is a Spanish company that holds the exclusive commercial and television rights of the Road Racing World Championship Grand Prix (MotoGP). In the course of a tax audit, the Spanish tax authorities qualified the payments as a supply of know-how and a lease of industrial equipment within the definition of “royalties” in article 12 of the OECD Model (2005), as opposed to Dorna, which labeled them as business profits. Such payments were, thus, subject to Spanish withholding tax.

15.2. Facts of the case

In the judgment, the qualification of three services rendered to Dorna were subject to judicial scrutiny by the AN. In the first contract signed between a French entity (Tech 3) and Dorna, the former company aimed to conduct research and test specific Dunlop tires for the purposes of improving the quality and competitivene...