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BEPS Action 6 - no land in sight
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.
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