Tax Treaty Case Law around the Globe 2022

33.1. Introduction

The Argentine Supreme Court resolved on the Molinos Argentina v. DGI on 2 September 2021, upholding AFIP’s position by a 3-1 vote. Molinos constitutes the main leading case on alleged treaty shopping practice; this case involved the establishment of a holding company in Chile through which dividends from subsidiaries located in Peru and Uruguay would be passed to Argentina, presumably to benefit from a combination of the Chilean domestic tax treaty and the Argentina-Chile Income and Capital Tax Treaty (1976) in force at the time of the alleged treaty shopping.

In August 2016 the Federal Court of Appeal upheld the Tax Court’s decision arguing that, firstly, the Chilean holding was not established to carry on the international expansion of the economic group led by the Argentine parent, but solely to obtain tax benefits under the Argentina-Chile Income and Capital Tax Treaty (1976), allowing the latter to be labeled as a mere conduit. Secondly, the taxpayer’s interpretation of the tax treaty violates the principle of good faith. Lastly, the absence of anti-abuse provisions in the Argentina-Chile Income and Capital Tax Treaty (1976) permits the use of the principle...