publication . Article . 2017

The reasonableness test of the Principal Purpose Test Rule in OECD BEPS Action 6 (Tax Treaty Abuse) versus the EU principle of legal certainty and the EU abuse of law case law

Dennis Weber;
Open Access English
  • Published: 01 Aug 2017 Journal: Erasmus law review, volume 2,017, issue 1, pages 48-59 (issn: 2210-2671, Copyright policy)
  • Country: Netherlands
Abstract
textabstractThe OECD BEPS Action 6 report contains a principal pur- pose test rule (PPT rule) for the purpose of combating abuse of tax treaties. This PPT rule is also included in the OECD Multilateral Instrument. The PPT rule is (amongst others) applicable when ‘it is rea- sonable to conclude’ that a benefit (granted by a tax treaty) was one of the principal purposes of any arrangement/ transaction. This requirement contains two elements: the reasonableness test and the principal purpose test. In literature it is observed that (i) the reasonableness test of the PPT rule could be contrary to the European Union’s principle of legal certainty; (ii) that the OECD P...
Subjects
free text keywords: GAAR, abuse, BEPS, principal purpose test, Discretion, media_common.quotation_subject, media_common, Law, Tax treaty, European union, media_common.cataloged_instance, Legal certainty, Economics, Common law, Contravention, Tax avoidance, Directive
Related Organizations
53 references, page 1 of 4

7. Reasonableness tests are also used outside of tax law, for example, 'a reasonable doubt' in UK, US and Canadian criminal law.

8. See P. Rosenblatt, General Anti-Avoidance Rules for Major Developing Countries, Kluwer Law International (2014), para. 3.2.1.

9. See R. Krever, 'General Report: GAARs', published in GAARS - A Key Element of Tax Systems in the Post-BEPS, European and International Tax Law and Policy Series, No. 3, IBFD (2016), in para. 1.4. 'taxpayer's purpose'.

10. See also Reinout Kok, 'The Principal Purpose Test in Tax Treaties Under BEPS 6', 44(5) Intertax (2016), at 406.

12. Preventing the granting of treaty benefits in inappropriate circumstances, Action 6: final report, OECD/G20 Base Erosion and Profit Shifting project, 5 October 2015, Commentary on the PPT rule: point 14, example C (manufacturing plant in developing country).

13. Preventing the granting of treaty benefits in inappropriate circumstances, Action 6: final report, OECD/G20 Base Erosion and Profit Shifting project, 5 October 2015, Commentary on the PPT rule: point 14, example G.

14. Preventing the granting of treaty benefits in inappropriate circumstances, Action 6: final report, OECD/G20 Base Erosion and Profit Shifting project, 5 October 2015, Commentary on the PPT rule: point 8.

15. Art. 207(1) Finance Act 2013.

16. HM Revenue and Customs (HMRC) General Anti Abuse Rule (GAAR) guidance (Approved by the Advisory Panel with effect from 30 January 2015), c.3.3.

17. M. Lang, BEPS Action 6: Introducing an antiabuse rule in tax treaties, Tax Notes International, 655, at 658.

18. A. Bhargava, 'The Principal Purpose Test: Functioning, Elements and Legal Relevance', in Blum and Seiler (eds.), Preventing Treaty Abuse, Series on International Tax Law (2016), 311, at 318.

19. Pinetz, above n. 2, at 116. See also E. Pinetz, 'Use of the Principal Purpose Test to Prevent Treaty Abuse', in Lang et al. (eds.), Base Erosion and Profit Shifting (BEPS), Series on International Tax Law (2016), Linde, at 271.

20. Lang, above n. 17.

21. See O. Koriak, 'The Principal Purpose Test Under BEPS Action 6: Is the OECD Proposal Compliant with EU Law?' ET (2016), at 552 and C. Panayi, 'The Compatibility of the OECD/G20 Base Erosion and Profit Shifting Proposals with EU Law', 1(2) IBFD Bulletin 95 (2016).

22. Kemmeren, above n. 2.

53 references, page 1 of 4
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