Tax Treaty Case Law around the Globe 2021

S. 298I. Introduction

The Praxair case addresses an alleged treaty abuse practice that involved the interposition of a holding company in Spain, i.e. Praxair Holding Latinoamericana SL (hereinafter Praxair Holding) that enabled Praxair Argentina S.A. (hereinafter Praxair Argentina) to avoid the withholding tax on wealth on behalf of its shareholder resident abroad based on Article 22(4) of the Argentina-Spain Income and Capital Tax Treaty (1992) (hereinafter the Argentina-Spain tax treaty) in force at that time which led to a double non-taxation phenomenon.

Tax authorities analyzed the case based on the principle of economic reality or “substance over form” – derived from domestic general anti-abuse rule (GAAR)– set out in Articles 1 and 2 of the Tax Procedural Law (hereinafter TPL) to disregard the scheme. More specifically, Article 22(4) of the Argentina-Spain tax treaty established that shares or participations in the capital or assets shall only be taxable in the state where the holder was a resident, i.e. Spain.

In September 2020, the court of appeal confirmed the judgment of the lower court in favour of the taxpayer. However, the court focused on the tax evasion aspects of the case an...