Here we would like to briefly acquaint you with the conclusions of a recent judgment of the Supreme Administrative Court 3 Afs 40/2018-68 from 27 August 2021, with which this court followed up on its earlier decisions in the matter of determining the beneficial owner of revenues going to a tax non-resident, in this case more specifically with regard to the existence of a silent partner. 

The object of the dispute was the issue of assessment of additional withholding tax for a Czech payer on grounds of payment of interests to a Dutch tax resident as the recipient. According to the claim of the taxpayer, at the time of payment of the interests, their legal owner was only a company residing in the Netherlands, based on a loan agreement made between the two companies.

Nevertheless, within the tax proceeding, the tax administrator obtained a copy of a contract on silent partnership made between the Czech taxpayer, the Dutch company and a company residing at the Isle of Man from the Police of the Czech Republic upon request, based on which the tax administrator reached the conclusion that the loan agreement was made and the interests paid as part of a contract on silent partnership, and the 99 % beneficial owner of the paid revenues was the company residing at the Isle of Man.      

The Supreme Administrative Court identified with the conclusion of the tax administrator that the beneficial owner of the revenues in the assessed case was not the Dutch company but the silent partner and confirmed the correctness of additionally assessed withholding tax in this connection, further stating that judicial protection cannot be provided for such action of the taxpayer, which manifestly led to bypassing the double taxation treaty.