The Resource Implementation in practice of the principal purpose test in the Multilateral Convention

Implementation in practice of the principal purpose test in the Multilateral Convention

Label
Implementation in practice of the principal purpose test in the Multilateral Convention
Title
Implementation in practice of the principal purpose test in the Multilateral Convention
Creator
Subject
Language
eng
Summary
This article discusses the implementation, operation and application of Article 7(1) of the 'Multilateral Convention', which contains provisions related to the prevention of treaty abuse, including treaty shopping, that correspond to changes proposed in the Base Erosion and Profit Shifting (BEPS) Action 6 Final Report. The wording of the comparable Covered Tax Agreements between the United Kingdom and China, India, Russia and South Africa, vis-à-vis the wording of Article 7(1) of the Multilateral Instrument (MLI), is analysed, where 'purpose provisions' are included with respect to specific benefits, generally royalties, interests and dividends, although there is no "catch-all provision". The provisions in these double taxation agreements might be replaced by the 'Principal Purpose Test' provision of Article 7(1). Nonetheless, mismatched choices and unpredictable asymmetries in practice will arise, resulting in further inconsistencies and complexities that may cause uncertainty about which tax treaty wording is of value. To overcome these issues, the compatibility clause in Article 7(2) of the MLI will come into play, supplemented by the lex posterior principle of the Vienna Convention on the Law of Treaties (VCLT)
Citation source
In: Intertax. - Alphen aan den Rijn. - Vol. 46 (2018), no. 1 ; p. 45-57
http://library.link/vocab/creatorName
Gomes, M.L
Geographic coverage
International
Language note
English
http://library.link/vocab/subjectName
  • treaty abuse
  • MLI
  • tax treaty
  • principal purpose test
  • treaty interpretation
Label
Implementation in practice of the principal purpose test in the Multilateral Convention
Instantiates
Publication
Label
Implementation in practice of the principal purpose test in the Multilateral Convention
Publication

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