OECD Project taking measures against tax treaty abuse
Bilateral tax treaties have long served to prevent harmful double taxation and remove obstacles to cross-border trade and investment. The extensive network of more than 3000 treaties worldwide has, however, also given rise to treaty abuse and so-called “treaty-shopping” arrangements. Treaty shopping typically involves the attempt to indirectly access the benefits of a tax treaty between two jurisdictions by a person who is not a resident of one of those jurisdictions, often through complex structures and arrangements. Taxpayers engaged in treaty shopping and other treaty abuse strategies undermine tax sovereignty by claiming treaty benefits in situations where these benefits were not intended to be granted, thereby depriving jurisdictions of tax revenues.
Summary
The attached document discusses the introduction of the Multilateral instrument (MLI) and the Principal Purpose Test (PPT) in how this relates to determining if business decisions are made for the sole purpose of international tax treaty abuse. Within the PPT we see Anti-avoidance rules in the form of SAAR (specific anti-avoidance rules) and GAAR (General anti-avoidance rules) and how these apply as tools and we discuss how they can conflict. Lawyers must have a thorough understanding of these rules and how they apply in the field of international tax advisory.
View or download the document below:
A.J.W. (Andre) Derksen RBc
International tax lawyer
Member of
Dutch Order of Administration and Tax Professionals
Register of Tax Advisors
International Fiscal Association
