Einde inhoudsopgave
Treaty Application for Companies in a Group (FM nr. 178) 2022/6.3.8.6
6.3.8.6 The application of the PPT
L.C. van Hulten, datum 06-07-2022
- Datum
06-07-2022
- Auteur
L.C. van Hulten
- JCDI
JCDI:ADS659420:1
- Vakgebied(en)
Omzetbelasting / Plaats van levering en dienst
Voetnoten
Voetnoten
The specific anti-abuse rules such as the beneficial ownership requirement, the LOB provision and the provision to combat treaty shopping via a permanent establishment located in a low-tax jurisdiction do not seem suitable to comprehensively combat unintended double non-taxation, as they are only applicable under specific circumstances.
See also par. 3.3.5.4 and par. 4.2.3.5.
In, e.g., the Protocol of the treaty between Germany and the Netherlands a provision is included in which a variant of a group approach is applied for an anti-abuse provision (associated companies in the Netherlands should be considered on a consolidated basis from a German perspective, see par. 3.4.3).
R.J. Danon, ‘Treaty Abuse in the Post-BEPS World: Analysis of the Policy Shift and Impact of the Principal Purpose Test for MNE Groups’, Bulletin for International Taxation 2018, vol. 72, no. 1, par. 4.6.1.
Another potential solution in combatting unintended double non-taxation could be found in the application of a general anti-abuse provision, such as the PPT (art. 29, par. 9, OECD MTC).1 The PPT is applied to prevent the granting of treaty benefits in situations where, taking into account all relevant facts and circumstances, it can be reasonably concluded that obtaining the treaty benefit was one of the main purposes of the arrangement or transaction which directly or indirectly generated that benefit. As an exception to this rule, the treaty advantage is not withheld in situations where granting it would be in line with the object and purpose of the provisions concerned.
It is clear that both the direct and indirect unwanted claiming of treaty benefits falls within the scope of application of the provision. As described, it is not entirely clear whether a group approach may be applied in a positive manner from the perspective of the taxpayer.2 In my view this would be a logical approach, as it contributes to achieving the objectives of the OECD MTC. By taking into account the activities conducted by group companies, the economic reality would be reflected better.3 Such a clarification would not have to be included in the OECD MTC. An additional example in the OECD Commentary to clarify this issue seems sufficient.
Would the PPT be effective in abolishing double non-taxation in abusive situations? First, the PPT as such is not focused on whether or not there is double non-taxation, the question is whether there is a treaty benefit. Additionally, the PPT is an anti-abuse rule, which is meant to safeguard the proper functioning of the tax system and can be seen as a ‘last resort’. The interpretation of the PPT raises issues. Therefore, its exact scope is not clear, making it an uncertain tool to combat unintended double non-taxation. Moreover, the provision seems substance oriented.4 All in all, it does not seem logical to depend on the PPT as a general tool to combat double non-taxation in the case of tax avoidance.