Tax Treaty Case Law around the Globe 2024
1. Aufl. 2025
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31.1. Introduction
On , the Supreme Court of India (SCI) pronounced its first judgment on the issue of “tax sparing” credit in the context of the India-Oman tax treaty. Before going into the facts of the case and the legal issues involved, it will be appropriate to recapitulate in brief the concept of tax sparing.
Developing countries often extend tax concessions, sometimes on their own and sometimes at the bidding of advisers, to attract foreign investments in the country. Such incentives may take many forms from outright tax holidays for certain periods to reduce or eliminate taxes on passive incomes. It may also be that the incentives are offered to foreign investors alone.
While the efficacy of tax incentives in attracting or maintaining investments, in particular, foreign investments, has always been questioned by economists, states do compete with each other in offering such incentives. In the context of foreign investments, however, such incentives may produce curious results that amount to poor countries that are trying to attract investments ending up subsidizing the coffers of capital exporting jurisdictions. This result follows from the general practice of ...