Anti-Abuse Rules in International Tax Law and their Interactions

1. Introduction

In international tax law, resolving the dual residency of companies is critical for delineating tax liabilities across jurisdictions. Historically, the dual residency issue was addressed through the place of effective management (PoEM) rule defining tax residence based on where companies’ substantive management activities took place. However, the 2017 updates to the OECD Model Convention (OECD MC) introduced a significant shift with the mutual agreement procedure (MAP), a procedural mechanism requiring states to negotiate and agree on the residency status of dual-resident entities.

Unlike the PoEM that directly determines a company’s residency based on operational management, the MAP approach allows tax authorities from the involved jurisdictions to negotiate and agree on the residency status of dual resident entiS. 358ties. This procedural shift aims to provide a more dynamic and flexible approach to resolving dual residency conflicts, granting tax authorities broad discretion in their decisions. However, this change brings potential conflicts with similarly broad rules designed to combat abusive situations.

While some authors have explored the implications of the MAP withi...