Preventing Treaty Abuse

I. S. 88Introduction

In the world today, globalization and cross-border transactions conducted by global corporations have successfully gotten further ahead of international tax regulations. Some taxpayers have successfully conducted their tax planning and caused gaps and mismatches that can be exploited to generate double non-taxation. This kind of tax planning strategy that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid, is known as Base Erosion and Profit Shifting (“BEPS”).

Many experts are of the opinion that the BEPS project introduced by the OECD is a ‘naïve’ and ambitious project. The BEPS Action Plan is the most technically complex and ambitious geopolitical project initiated in the history of the OECD.However, despite the pessimist opinion of some, the BEPS project in fact brings about significant changes and encourages many countries to adopt policies in order to prevent the tax gap caused by BEPS.

In Europe, BEPS has brought significant changes to European law. Pistone states that for the first time in the history of interna...