Michael McGowan, Andrew Thomson and Emma Hardwick (Sullivan & Cromwell) review Action 6 of the BEPS report.
At the core of the Action 6 report are proposed anti-treaty shopping provisions for tax treaties:
a clear statement in the treaty title and preamble that the contracting states wish to prevent tax avoidance;
plus:
a limitation on benefits (LOB) rule plus a principal purpose test (PPT); or
the PPT on its own; or
a limitation on benefits rule plus an anti-conduit mechanism (possibly in the form of a restricted PPT).
An LOB rule is intended to be relatively certain but is complex and can be uncertain or unpredictable at the margin. A PPT is less complex but is inherently uncertain. From the taxpayer’s perspective combining the two gives the worst of both worlds particularly if tax authorities are not resourced to give
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Michael McGowan, Andrew Thomson and Emma Hardwick (Sullivan & Cromwell) review Action 6 of the BEPS report.
At the core of the Action 6 report are proposed anti-treaty shopping provisions for tax treaties:
a clear statement in the treaty title and preamble that the contracting states wish to prevent tax avoidance;
plus:
a limitation on benefits (LOB) rule plus a principal purpose test (PPT); or
the PPT on its own; or
a limitation on benefits rule plus an anti-conduit mechanism (possibly in the form of a restricted PPT).
An LOB rule is intended to be relatively certain but is complex and can be uncertain or unpredictable at the margin. A PPT is less complex but is inherently uncertain. From the taxpayer’s perspective combining the two gives the worst of both worlds particularly if tax authorities are not resourced to give
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
