Tax Treaty Case Law around the Globe 2024

34.1. Introduction

The Praxair SRL vs Direccion General Impositiva (DGI)case addresses an alleged treaty abuse practice that involved the interposition of a holding company in Spain, i.e. Praxair Holding Latinoamericana SL (hereafter, Praxair Holding) that enabled Praxair Argentina S.A. (hereafter, 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) (hereafter, the Argentina-Spain DTC) that was in force at that time which lead to a double non-taxation phenomenon.

Tax authorities analysed the case based on the principle of economic reality or “substance over form” - derived from domestic GAAR - set out in articles 1 and 2 of the Tax Procedural Law (TPL) to disregard the scheme. More specifically, article 22(4) of the DTC established that shares or participation in the capital or assets shall only be taxable in the state where the holder was a resident, i.e. Spain.

The Federal Court of Appeals (FCA) scrutinized the case based on the principle of economic reality or “substance over form”, rooted in domestic GAAR. Specifically, the court examined whether t...