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BEPS Action 6 - no land in sight

Luxembourg

Action 6 of the OECD’s action plan on base erosion and profit shifting targets the prevention of tax treaty abuse. Taxand Luxembourg provides a critical overview of the proposals.

BEPS action 6 aims to prevent perceived abuses of tax treaties. These are best addressed through specific and targeted antiabuse provisions designed so that they have a minimum impact on genuine business operations. However, both the highly complex and restrictive LOB provision and the vague and subjective principal purpose test (PPT) fail in this respect, since they are too general in nature and not limited to clear cases of abuse.

It is evident that anti-abuse provisions that have the effect of precluding treaty benefits regarding common business structures when no treaty-shopping concern is present would do more harm than good and should not be included in the OECD model.

Discover more: Update on BEPS Action 6


Your Taxand contacts for further queries are:
Keith O'Donnell
T. +352 26 940 257
E. keith.odonnell@atoz.lu

Oliver Hoor
T. 
+352 26 940 646
E. oliver.hoor@atoz.lu

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Taxand's Take

The proposals would be especially detrimental for companies that are resident in smaller countries with open economies (such as Luxembourg) and are predominantly owned by international investors.

Taxand's Take Author

Keith O'Donnell
Taxand Board member & Taxand global real estate tax service line leader
Luxembourg

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