Preventing Treaty Abuse

I. S. 71Introduction

The publication of the BEPS report on Action 6 is paradigmatic regarding abuse of treaties. One of the mandates of Action 6 was to clarify that tax treaties are not intended to be used to generate double non-taxation.

Through certain changes in the preamble and the title, the intention of the OECD is to address outcomes of double non-taxation, by the denial of treaty benefits. The placement of the amendments is of particular importance, due to its interpretational consequences in relation with the Vienna Convention on the Law of Treaties.

The fact that the OECD changed its approach towards double non-taxation by suggesting changes to its treaty model seems to be the ‘white flag’ of the interpretative efforts after the modifications of the commentaries of the OECD Model Convention of 2000 and 2008 in the attempt to hinder double non-taxation results due to qualification problems.

It is now suggested that the DTCs will include statements specifically providing that they are not intended to produce double non-taxation results. This will allow the interpreter to challenge this type of outcome via the mechanism of teleological interpretation, which will curb taxpayers from e...