Tax Treaty Case Law around the Globe 2015

S. 171Argentina: Treaty Entitlement and Abuse: Argentina’s Molinos Case

Axel Verstraeten

I. S. 172Introduction

The decisions made by the different courts in the Molinos case are very relevant because it was the first time that a tax treaty abuse case had been decided by the Argentinian courts. They are also significant, because structures like the ones used by Molinos were part of the reason for Argentina terminating its tax treaty with Chile.

The tax treaty abuse concept was not specifically addressed by the courts. However, the courts did give special consideration to the fact that the amendments to the Chilean law created a double non-taxation situation, which was against the original purpose of the tax treaty. It is worth mentioning that the treaty between Chile and Argentina was signed in the 1970’s when Argentina did not tax worldwide income, but Chile did.

The principal means used by the courts and the tax authorities to decide in the way they did, was the application of the Argentinian internal general anti-avoidance rule (principio de la realidad económica y abuso de las formas jurídicas) to the tax treaty between Argentina and Chile.

Moreover, even though the case refers to a tax treaty ba...