4.2.3.1 Introduction

The existence of groups of companies in which each entity is treated as a separate entity for tax purposes, provides base erosion and profit shifting opportunities.1 This is the main reason for the existence of the entire BEPS project of the OECD.2 The project was mandated to reform the international tax rules to ensure that multinational enterprises could be taxed ‘where economic activities take place and where value is created’.3 It should be kept in mind that abuse is not limited to groups of companies. Third parties can also agree on tax planning strategies. Still, in general, there are less tax planning strategies that can successfully be used in third party transactions in comparison to group situations.4

Anti-abuse provisions are an important element of the current tax systems. However, this topic is of a different order than loss compensation and other elements of tax groups as discussed above. These two topics are at the heart of the determination of the domestic tax base, whereas anti-abuse provisions generally aim to safeguard that base. An anti-abuse provision can therefore be seen as a precondition of an effectively functioning tax system rather than an independent element.

In the CJEU case law on direct taxation, the first clear anti-abuse interpretation can be found in the Cadbury Schweppes judgment.5 In that case the concept of ‘wholly artificial arrangement’ was used to describe situations in which a less favourable tax treatment for intra-EU cross-border situations could be justified because of the aim to reduce the risk of tax avoidance. Subsequently, the concept of anti-abuse has been concretised, inter alia, in the Deister Holding and Juhler Holding and in the Danish cases.6 The potential application of a group approach plays a role in the two later cases. Therefore, a brief summary of both cases is given below. Then, a conclusion is drawn with respect to the answer to the question whether a group approach for anti-abuse provisions should be applied according to the CJEU. Furthermore, the question whether the approach taken in the CJEU case law is also applied in the OECD MTC is answered, and if not, whether it would fit within the scope and objective of the OECD MTC to amend this.