Anti Abuse Rules And Tax Treaties

As the struggle to combat tax abuse and tax avoidance gains momentum, ways of making a tax jurisdiction ‘manipulation-proof’ continue to proliferate, from new or revised provisions in model tax treaties to a dramatic increase in the number and variety of anti-abuse and anti-avoidance rules at all levels of government. These measures interact with national tax systems, general anti-abuse clauses and tax treaties. The conflicts and other legal difficulties that inevitably result deserve intensive scrutiny. This book provides an in-depth analysis of current issues concerning the relations of various anti-abuse rules to each other and their impact on the application of tax treaties. The topics include the following: domestic general anti-avoidance rules (GAARs); domestic specific anti-avoidance rules (SAARs) (including controlled foreign company rules); minimum holding periods; indirect transfers of immovable property, shares, and rights; limitation on benefits; residence criteria in tax treaties; tax treatment of sportspersons and entertainers; the principal purpose test of Article 29 (9) OECD Model (2017); and influence of European Union Law on tax treaty abuse. The chapters are revised and expanded versions of papers presented at the 30th Viennese Symposium on International Tax Law held on 12 June 2023 at Vienna University of Economics and Business. Each author offers an in-depth analysis of a particular topic, drawing on the most recent scientific research. This is the only book available to offer such a wide-ranging, detailed, and practical analysis of how the full range of anti-abuse rules interacts with tax treaties. It will prove of immeasurable value to practitioners and law firms active in tax planning, tax consultants, academics and researchers in international tax law and counsel for companies involved in international business.

This book analyses the relationships between tax treaties and domestic law from a constitutional and an international point of view, and how they can be improved in the fields of treaty override, treaty residence and anti-abuse measures. It also shows how the issues raised by these relationships are resolved by tax administrations and courts in selected European and non-European countries.

Analysis of notion, roots und measures of treaty abuse The OECD initiative on Base Erosion and Profit Shifting has put the issue of treaty abuse and the means to counter it on top of the global political agenda. Preventing treaty abuse is therefore currently one of the most debated topics in international tax law. Diverging national legal traditions in combatting abuse both under domestic and tax treaty law have led to a globally diversified legal framework in this respect and make the OECD’s agenda to harmonize these attempts even more challenging. The aim of this book is to analyze the notion of treaty abuse, its historical roots and the measures to counter it. The book’s topics cover a wide range of both policy and legal issues. The contributions’ main focus lies onanalyzing the proposals put forward by the OECD in BEPS action items 6 and 7. In addition, this book analyzes the lessons which can be learnt from the US tax treaty policy and elaborates on the effects the intensified fight against treaty abuse will have from a Non-OECD member state perspective. Also EU law is taken into account and the question raised which impact the fundamental freedoms might have on the development of new anti-avoidance rules. Finally the relation between domestic and treaty based anti-avoidance is analyzed in great detail, identifying the methodical problems of ensuring a sound and abuse safe legal framework. With this book, the authors and editors hope to contribute to the discussion on selected issues of preventing treaty abuse and the challenges they present to policy makers, judges, tax administrations and tax advisers.

Academic Paper from the year 2020 in the subject Business economics - Accounting and Taxes, grade: 1.7, University of Hamburg (IIFS), course: USA Tax Law, language: English, abstract: Double Taxation Treaties (“DTT“) are treaties between two or more countries to avoid international double taxation of income and property of individuals or legal entities. The main purpose of DTT is to divide the right taxation between the involved countries, to avoid differences in taxation and to ensure taxpayers’ equal rights and security. International tax planning has become a serious concern and companies started to shift their income to low-taxed jurisdictions. Therefore, states with a higher taxation fear for their tax revenues. That is the reason why the prevention of abusive use of tax treaty benefits became a central aspect in the tax treaty policy of most industrialized countries.

The relationship between domestic anti-abuse rules and double taxation treaties is a complex and unsettled issue. This is evidenced by the 2000 OECD Model Tax Convention, which notes in the Introduction (Para. 41), as did the previous versions of the Introduction, that the OECD Fiscal Affairs Committee continues to study the improper use of tax treaties and international tax evasion. The complexity of this topic increases if the following considerations are taken into account: 1) The standard for the anti-abuse provisions of tax law is not the same in every country. Some countries have a bias toward legal certainty (i.e. the taxpayer must always know in advance the tax consequences of his acts), which means that these legal systems may not accept general clauses against abuse/avoidance of tax law. Other countries defend the theory (already discarded in Spain) that the tax norm, as a norm that restricts individual rights, must be interpreted strictly and cannot therefore be applied beyond the strict wording of a provision. Still other countries have a more rigid anti-abuse standard in their tax system. 2) General anti-abuse clauses are not the only means by which a tax system reacts to tax avoidance or evasion. Many norms in international tax law are designed to counteract specific cases that are regarded as examples of tax avoidance (e.g. thin capitalization rules and controlled foreign company (CFC) legislation). This means that, in the last decades, the international tax world has witnessed a dramatic increase in the number of anti-abuse rules, especially anti-abuse rules aimed at dealing with particular cases. These rules exist in national tax systems together with general anti-abuse clauses and tax treaties; the interaction between all these norms creates problems that are difficult to solve. 3) The international initiatives on harmful tax competition depend on the effective application of internal anti-abuse norms to treaty-protected situations. If general antiabuse norms cannot be applied in a tax treaty context, the entire process of fighting harmful tax competition may slow down dramatically. 4) In Spain's tax system, the General Tax Law (Ley General Tributaria, hereafter “GTL”) has three general anti- abuse instruments that the tax administration may use: Art. 24 GTL (fraus legis), Art. 25 GTL (simulation) and Art. 28(2) GTL (qualification). The scope of these three tools is not entirely clear, especially if it is noted that the tax jurisprudence in Spain has added a fourth instrument the “indirect business” theory (the “indirect business” is usually the means to achieve fraus legis; this theory is therefore redundant if Art. 24 GTL (fraus legis) is taken into account).

"With particular reference to the Netherlands and the United States."--T.p.

This study considers how tax authorities attempt to strike down international tax avoidance structures, in particular those involving the use of conduit and base companies set up by third-country residents for purposes of "treaty shopping" and "EC-Directive shopping". The book focuses on the interaction between provisions and judicially developed doctrines of domestic tax law preventing international tax avoidance on the one hand, and norms of international law, in particular tax treaties and rules of Community law, on the other. It also considers treaty-based anti-avoidance measures such as the "beneficial ownership" requirement and "limitation on benefits" provisions. This part of the study compares and analyses the case law of Australia, Austria, Belgium, Canada, the Czech Republic, Finland, France, Germany, India, the Netherlands, Switzerland, the United Kingdom, and the United States.