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The Multilateral Convention To Implement Tax Treaty Related Measures To Prevent Base Erosion and Profit Shifting (MLI) came into force on 1 July 2018, and has been signed by more than 80 jurisdictions, including Canada. This MLI has been described as "a historical turning point in the area of international taxation"; it introduces a third layer of rules for the taxation of cross-border transactions, in addition to domestic tax law and bilateral tax treaties. Of the many provisions of the MLI, the most important are the preamble text in article 6(1) and the general anti-avoidance provision - the so-called principal purpose test (PPT) - in article 7(1). Both of these provisions have been adopted by all signatories to the MLI in order to satisfy the OECD's minimum standard on tax treaty abuse under BEPS Action 6. This two-part article considers the structure and potential application of the PPT in the context of pre-BEPS responses to perceived tax treaty abuses, the OECD's work on BEPS Action 6, and other provisions of the MLI, including the preamble text in article 6(1). This first part of the article reviews pre-BEPS responses to perceived tax treaty abuses, providing necessary background and context for understanding BEPS Action 6, the MLI, and the PPT. The second part examines the PPT in light of this background and in the context of BEPS Action 6 and other provisions of the MLI, considering the structure of this provision and the kinds of transactions or arrangements to which it might apply.
The Multilateral Convention To Implement Tax Treaty Related Measures To Prevent Base Erosion and Profit Shifting came into force on 1 July 2018, and has been signed by more than 80 jurisdictions, including Canada. This multilateral instrument (MLI) has been described as "an historical turning point in the area of international taxation"; it introduces a third layer of rules for the taxation of cross-border transactions, in addition to domestic tax law and bilateral tax treaties. Of the many provisions of the MLI, the most important are the preamble text in article 6(1) and the general anti-avoidance provision - the so-called principal purpose test (PPT) - in article 7(1). Both of these provisions have been adopted by all signatories to the MLI in order to satisfy the OECD's minimum standard on tax treaty abuse under BEPS action 6. This two-part article considers the structure and potential application of the PPT in the context of pre-BEPS responses to perceived tax treaty abuses, the OECD's work on BEPS action 6, and other provisions of the MLI, including the preamble text in article 6(1). The first part of the article reviewed pre-BEPS responses to perceived tax treaty abuses, providing necessary background and context for understanding BEPS action 6, the MLI, and the PPT. This second part examines the PPT in light of this background and in the context of BEPS action 6 and other provisions of the MLI, considering the relationship of the PPT to other anti-avoidance doctrines, principles, and rules; the various elements that constitute its basic structure; the kinds of transactions or arrangements to which it may be expected to apply; and the consequences of its application.
The Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting or Multilateral Instrument (MLI) has been described as “an historical turning point in the area of international taxation” which introduces a third layer of tax rules for the taxation of cross-border transactions in addition to domestic tax law and bilateral tax treaties. Of the many provisions of the MLI, the most important are the preamble text in Article 6(1) and the so-called principal purpose test (PPT) in Article 7(1), both of which have been adopted by all signatories to the MLI in order to satisfy the OECD's minimum standard on tax treaty abuse under BEPS Action 6. This two-part article considers the structure and potential application of the PPT in the context of pre-BEPS responses to perceived tax treaty abuses, the OECD's work on BEPS Action 6, and other provisions of the MLI including the preamble text in Article 6(1). The first part, in the previous issue of the Journal, reviewed pre-BEPS responses to perceived tax treaty abuses, providing necessary background and context for understanding BEPS Action 6, the MLI and the PPT. The second part, in this issue of the Journal, examines the PPT in light of this background and in the context of BEPS Action 6 and other provisions of the MLI, considering its relationship to other anti-avoidance doctrines, principles and rules, the various elements that comprise its basic structure, the kinds of transactions or arrangements to which it may be expected to apply, and the consequences of its application.
Schwarz on Tax Treaties is the definitive analysis of tax treaties from United Kingdom and Irish perspectives and provides in-depth expert analysis of the interpretation and interaction of those treaty networks with the European Union and international law. The sixth edition significantly develops the earlier work with enhanced commentary and is updated to include the latest UK, Irish domestic and treaty developments, international and EU law, including: Covered Tax Agreements modified by the BEPS Multilateral Instrument; judicial decisions of Ireland, the UK and foreign courts on UK and Irish treaties; Digital Services Tax; treaty binding compulsory arbitration; Brexit and the EU-UK Trade and Cooperation Agreement; taxpayer rights in exchange of information; taxpayer rights in EU cross-border collection of taxes; attribution of profits to permanent establishments; and EU DAC 6 Disclosure of cross-border planning. Case law developments including: UK Supreme Court in Fowler v HMRC; Indian Supreme Court in Engineering Analysis Centre of Excellence Private Limited and Others v CIT; Australian Full Federal Court in Addy v CoT; French Supreme Administrative Court in Valueclick; English Court of Appeal in Irish Bank Resolution Corporation v HMRC; JJ Management and others v HMRC; United States Tax Court in Adams Challenge v CIR; UK Tax Tribunals in Royal Bank of Canada v HMRC; Lloyd-Webber v HMRC; Esso Exploration and Production v HMRC; Glencore v HMRC; McCabe v HMRC; Padfield v HMRC; Davies v HMRC; Uddin v HMRC; English High Court in Minera Las Bambas v Glencore; Kotton v First Tier Tribunal; and CJEU in N Luxembourg I, and others (the ‘Danish beneficial ownership cases’); État belge v Pantochim; College Pension Plan of British Columbia v Finanzamt München; HB v Istituto Nazionale della Previdenza Sociale. About the Author Jonathan Schwarz BA, LLB (Witwatersrand), LLM (UC Berkeley), FTII is an English Barrister at Temple Tax Chambers in London and is also a South African Advocate and a Canadian and Irish Barrister. His practice focuses on international tax disputes as counsel and as an expert and advises on solving cross-border tax problems. He is a Visiting Professor at the Faculty of Law, King’s College London University. He has been listed as a leading tax Barrister in both the Legal 500, for international corporate tax, and Chambers’ Guide to the Legal Profession, for international transactions and particular expertise in transfer pricing. He has been lauded in Who’s Who Legal, UK Bar for his ‘brilliant’ handling of cross-border tax problems. In Chambers Guide, he is identified as ‘the double tax guru’ with ‘extraordinary depth of knowledge and experience when it comes to tax treaty issues and is a creative thinker and a clear and meticulous writer’.
Modern-day tax treaties have their foundations in one of the three Model Tax Treaties developed by the League of Nations in 1928. Using previously unexplored archival material, Sunita Jogarajan provides the first in-depth examination of the development of the League's Models. This new research provides insights into questions such as the importance of double taxation versus tax evasion; the preference for source-taxation versus residence-taxation; the influence of theory and practice on the League's work; the development of bilateral rather than multilateral treaties; the influence of developing countries on the League's work; the role of Commentary in interpreting model tax treaties; and the influential factors and key individuals involved. A better understanding of the development of the original models will inform and help guide interpretation and reform of modern-day tax treaties. Additionally, this book will be of interest to scholars of international relations and the development of law at international organisations.
Addressing base erosion and profit shifting is a key priority of governments around the globe. This Explanatory Statement offers an overview of the BEPS Project and outcomes.
The Law of Double Taxation Conventions Cross-border activities or transactions may trigger tax liability in two or more jurisdictions. In order to mitigate the financial burden resulting from these situations, States have entered into numerous double taxation conventions, which provide for rules that allocate the taxing rights between the contracting states. This handbook aims at providing an introduction to the law of double taxation conventions. It is designed for students – irrespective of their national background, but the author believes that it will also be of great help for tax experts who wish to know more about double taxation conventions, as well as for international law experts who wish to understand more about tax law. The handbook does not consider one jurisdiction in particular but rather takes examples from a wide range of different countries and their jurisdictions. It includes an overview of the problem of double taxation, the state practice in the conclusion of double tax conventions and their effects, the interpretation of double taxation conventions and treaty abuse. Furthermore, this updated handbook takes new developments into account occurred since the last edition of the book from 2013, in particular also the changes through OECD’s BEPS project and the Multilateral Instrument. It deals with the latest versions of the OECD Model Tax Conventions on Income and on Capital and the UN Model Double Taxation Convention between Developed and Developing Countries, both published in 2017, as well as the latest version of the OECD Model Double Taxation Convention on Estates and Inheritances and on Gifts.
General anti-avoidance rules (GAARs) have been a topic of great relevance in practice as well as in academia for decades. In a post-BEPS tax world, with national legislators introducing or tightening GAARs, and with the European Union and OECD suggesting implementation of such rules, the topic seems more important than ever. The aim of this book is to give tax policymakers, tax authorities, tax courts and tax practitioners an idea of the various understandings of and approaches towards tax avoidance in 39 countries.
This article discusses the implementation, operation and application of Article 7(1) of the 'Multilateral Convention', which contains provisions related to the prevention of treaty abuse, including treaty shopping, that correspond to changes proposed in the Base Erosion and Profit Shifting (BEPS) Action 6 Final Report. The wording of the comparable Covered Tax Agreements between the United Kingdom and China, India, Russia and South Africa, vis-à-vis the wording of Article 7(1) of the Multilateral Instrument (MLI), is analysed, where 'purpose provisions' are included with respect to specific benefits, generally royalties, interests and dividends, although there is no "catch-all provision". The provisions in these double taxation agreements might be replaced by the 'Principal Purpose Test' provision of Article 7(1). Nonetheless, mismatched choices and unpredictable asymmetries in practice will arise, resulting in further inconsistencies and complexities that may cause uncertainty about which tax treaty wording is of value. To overcome these issues, the compatibility clause in Article 7(2) of the MLI will come into play, supplemented by the lex posterior principle of the Vienna Convention on the Law of Treaties (VCLT).