Base Erosion and Profit Shifting (BEPS)

I. S. 304Introduction

The original heading of BEPS Action 6 as stated in the Action Plan on Base Erosion and Profit Shifting was “Prevent Treaty Abuse”. For the subsequent Action 6 Deliverable, the OECD apparently decided on a softer wording, titling that document “Preventing the Granting of Treaty Benefits in Inappropriate Circumstances” – a phrase which can already be found in the explanations to Action 6 in the Action Plan. Nonetheless, the general objective of Action 6 remained unchanged. The measures proposed by the Action 6 Deliverable are intended to counter treaty shopping and treaty abuse, as these might result in non-taxation or reduced taxation – and thus create opportunities for tax evasion or tax avoidance.

The greater part of the above-mentioned BEPS Action 6 Deliverable focuses on the planned incorporation of a new limitation-on-benefits rule and a new rule on the principal-purpose test into future versions of the OECD Model Tax Convention (OECD Model) as core mechanisms against treaty shopping. Not only the Action 6 Deliverable itself, but also the public discussion seems to primarily revolve around these two new provisions, as the comments that the OECD received on the ori...