bluuebunny/crossref_metadata_2025 huggingface dataset:
Dual Role of the OECD Commentaries: Part 2
Authors: Nieminen Martti
Published: February 2022

The comprehensive two-part article deals with the OECD Commentaries’ relevance in tax treaty interpretation particularly from the perspective of Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties. The purpose of the article is to establish the legal basis for the use of the OECD Commentaries in the interpretative process and, most importantly, to determine their relative weight in the interpretative undertaking. The main finding is that the relative value of the OECD Commentaries is not fixed but varies from case to case. The Commentaries’ interpretative weight in each particular situation depends on whether it can be established that the common intention of the tax treaty parties was to copy the substance of the OECD MC in the relevant terms of their bilateral treaty. Accordingly, the Commentaries have a dual role to play. They may be ‘a commentary’ or ‘the Commentary’. When assessing which version of the OECD Commentaries is the one that corresponds to the intended substance of the tax treaty, it is noteworthy that also the temporal element of treaty interpretation (static or dynamic) must be decided case-by-case. It may be that the common intention of the parties was to give the treaty terms a fixed meaning but they may as well have wanted their mutual treaty, or parts of it, to function as a ‘living instrument’.
Automatic Exchange of Financial Information under the Directive on Administrative Cooperation in the Light of the Global Movement towards Transparency
Authors: Somare Maryte
Published: February 2022

Automatic Exchange of Information (AEoI) has become a globally accepted solution for countering international tax evasion on capital income. The origin of this unprecedented global solidarity lies in the aftermath of the crisis, which saw the global financial and economic systems struggling to recover from its consequences. The momentum provoked by FATCA has brought about the need for a new amendment of the Directive on Administrative Cooperation (DAC) earlier than envisaged. One of the main reasons for the efforts to amend the DAC was the most favoured nation clause provided for in Article 19. It obliges EU Member States which have committed under bilateral or multilateral agreements with third states to a wider cooperation than under the DAC to provide the same level of cooperation also to other EU Member States upon their request. The amendment of the DAC was pressing in order to avoid possible tensions between the Member States. In this article, the authors describe the main characteristics of the latest amendments of the DAC and highlight its similarities with and differences from AEoI under FATCA and under the OECD Global Reporting Standard. One important distinctive feature of the DAC 2 is that it explicitly provides for the protection of taxpayer rights by referring to the Data Protection Directive – a dedicated legal instrument safeguarding the protection of personal information.
The German CFC Rules after the Federal Fiscal Court Decision of 11 March 2015: A Toothless Tiger?
Authors: Moser Till
Published: February 2022

The groundbreaking ruling by the German Federal Fiscal Court dated 11 March 2015 significantly reduced the legal consequences of the German CFC rules, as income that is taxed under the CFC rules is now no longer subject to German trade tax. Especially for German corporate shareholders in CFCs, this reduces the tax burden by about 50%. This, in connection with the favourable taxation of dividends under the German CFC regime, has a tremendous impact on international tax planning from a German perspective. It leads to the question if even offshore investments triggering the German CFC regime are now being preferable to German domestic investment structures. Given this background, the following article revisits opportunities and challenges from a German tax planning perspective.
The Compatibility of Exit Tax Legislation Applicable to Corporate Taxpayers in France, Germany, Italy, The Netherlands, Portugal, Spain and The United Kingdom with the EU Freedom of Establishment - Part 1
Authors: Beare Tony , Caldas António Castro , Dony Aliénor , van Os Pieter , Silvestri Andrea , Pötgens Frank P.G. , Durand Pierre-Henri , Lasarte Guillermo Canalejo , Robert Anne , Scheifele Matthias , Wagner Gunther , Lancellotti Lucia , Romão Filipe , Pichel Paulo , Pombo David López
Published: February 2022

This three-part article discusses the compatibility of exit tax legislation applicable to corporate taxpayers in France, Germany, Italy, the Netherlands, Portugal, Spain and the United Kingdom with the EU freedom of establishment, especially in the light of the ECJ’s landmark National Grid decision. Part 1 scrutinizes whether a company transferring its tax residence or effecting an outbound cross-border conversion has access to Articles 49 and 54 TFEU under the laws of the Member State. It also addresses whether these laws restrict Article 49, and, if so, whether the restriction can be justified and is appropriate to ensure the attainment of its objective. Parts 2 and 3, each to be published in subsequent Intertax issues, review whether the legislation is proportional, address which other transactions the ECJ’s exit tax principles apply to, and provide conclusions and recommendations.
Hybrid Entities: Problems Arising from the Attribution of Income Through Withholding Tax Relief  Can Specific Domestic Provisions be a Suitable Solution Concept?
Authors: Kahlenberg Christian
Published: February 2022

The steadily increasing globalization of markets creates an immediate need to make adjustments to international tax law. At the same time, the lack of harmonization among national regulations fosters aspirations to achieve international tax arbitrage. In recent years, hybrid entity structures have been mentioned as effective means of tax avoidance or tax evasion. To respond to this development in a coordinated way, the BEPS project was initiated, and the OECD was put in charge to design viable solutions for a total of fifteen trouble spots that had been identified. The goal was to make sure that all states would act in sync. Recently – on October 5th – the final reports were published. Within the scope of Action 2, the particular focus is on hybrid entity structures. The present article uses the current developments at OECD level as an opportunity to scrutinize the addressed regulation for hybrid structures and to point out remaining loopholes. Subsequently, potential solutions are presented which also anticipate the risk of the treaty shopping.
Conflict of Source versus Residence-Based Taxation in India with Reference to Fees for Technical Service
Authors: Singh Manoj Kumar
Published: February 2022

Highly internationalized trade and commerce, in wake of globalization, is a contemporary reality. However, the increasing porosity of national boundaries has not changed the fact that every country has the sovereign right to tax income accruing, arising or received in it, on account of activities carried on in its territory. Yet, an important change with internationalization is that increasingly there are more than one sovereign nation entitled to claim ‘right to tax’. This sovereign right to impose tax, as is well known, can be exercised by either the country from where the income is sourced (source country) or the country where the taxpayer resides (residence country). However, in current times, where it is common for individuals or businesses to have activities connected to two or more than two countries, exercise of this ‘right to tax’ by each nation has given rise to a complex situation of individuals or business entities being faced with the problem of being subjected to the rigors of double taxation. The concept of ‘residence jurisdiction’ and ‘source jurisdiction’ are two fundamental concepts in the domain of International Taxation. While conflict between these two concepts of taxation is a problem in the international arena, interestingly in India, this preference for one over the other has been a bone of contention between legislature and judiciary of the country. While judiciary has been showing preference for ‘residence jurisdiction’, the legislature has been in favour of a regime based on the concept of ‘source jurisdiction’. This article explains the contours of this conflict as played out between the legislature and the judiciary in India. While endorsing the idea of tilt towards ‘source jurisdiction’ as a more appropriate regime for a developing country like India, this article argues that the need of the day is for taxation regime which contains adequate mixture of elements from both ‘residence jurisdiction’ and ‘source jurisdiction’.
From Skandia to Larentia: National Jurisdiction to Deviate from the VAT Directive
Authors: Bomer Albert H.
Published: February 2022

In the Skandia case the European Court of Justice has decided that, despite Skandia being one legal entity, there are taxable transactions between a head office in the United States and a fixed establishment that is part of a Vat group in Sweden. Those Member States which have implemented the Vat grouping in national law have done so using their individual methodology. This decision raises the question of whether a Member State can deviate from the Value Added Tax (VAT) Directive in its national legislation. The recent Larentia case makes clear that it is possible to do so if the provision is optional. This Article analyses the interpretation given by the European Court of Justice concerning national jurisdiction to deviate from the VAT Directive.
Hybrid Entity Issues in a Tax Treaty Context: OECD Approach versus Actual Tax Treaties
Authors: Breuer Almut , Verhoog Marlous
Published: February 2022

In this article the authors describe the issues relating to hybrid entities in a tax treaty context and the solution to these issues as proposed by the Organization for Economic Co-operation and Development (OECD) in the context of Base Erosion and Profit Shifting Action 2. The OECD solution and possible improvements thereto are analysed in light of the international tax treaty practice of the Netherlands and Germany.
The Business Views on Base Erosion and Profit Shifting and Its Implementation in the Group of Twenty and European Union
Authors: Andersson Krister
Published: February 2022

To decrease uncertainty and the risk of juridical double taxation, base erosion and profit shifting (BEPS) must be implemented and administered in a uniform way globally. Unfortunately, the European Union (EU) countries have embarked on a diverting path, with additional measures taken and with their own interpretation of some BEPS action points. The Directive (Anti-Tax Avoidance Directive) is furthermore a minimum standard for individual countries to be adjusted as individual Member States see fit. In the United States, on the other hand, there is considerable hesitation to introduce measures not already enacted earlier. Many countries in Asia have adopted a wait and see approach. The new and clarified rules of how to split taxable profit between countries will also be used in administrative procedures like state aid investigations in the EU. The Organisation for Economic Cooperation and Development (OECD), at request of Group of Twenty (G20), is aiming for uniformity but faces a tremendous challenge. An increase in tax disputes between countries is to be expected.
Base Erosion and Profit Shifting and Developing Country Tax Administrations
Authors: Lennard Michael
Published: February 2022

The Organisation for Economic Co-operation and Development (OECD) membership comprises thirty-four countries, and adding G20 countries which are not OECD members gives a total of forty-two countries participating most directly in the base erosion and profit shifting (BEPS) norm setting. There are therefore 151 UN Member countries whose participation in the BEPS process can be seen as relatively peripheral. Their political and representational significance and its relevance to global tax norm setting is often missed by a relevant but incomplete focus on the economic importance of the Group of Twenty (G20). The application to, and adaptation of, the BEPS outcomes to those countries, the likelihood of their commitment to such outcomes, and the way in which any such commitment is likely to find expression in practice are important to businesses economically engaging with such countries. In particular, an awareness of the way in which such countries are likely to view BEPS norm development and implementation, and to add to or depart from it on issues like the taxation of the services economy, should be a necessary part of any business planning, especially for global multinational enterprises (MNEs) seeking to engage with those countries as long-term business and development partners going forward. This article considers some of the key BEPS Actions and ‘Inactions’ in this context.
Just a Notion of Aid: How (Not) to Create a Fiscal State Aid Doctrine
Authors: Luja Raymond H.C.
Published: February 2022

The European Commission’s review of over 1,000 tax rulings across the European Union (EU) has drawn a lot of attention in recent years, with the EUR 13 billion Apple decision as its pinnacle for now (moneywise).1 It led to heated discussions between EU and US politicians and officials, as the Commission ordered certain large US companies (as well as others) to pay taxes it considered due with regard to fiscal years that were considered settled before.
Qualification of Services Under Double Tax Treaties in Brazil: Open Issues After Iberdrola Case
Authors: Castro Leonardo Freitas de Moraes e , Monteiro Alexandre Luiz Moraes do Rêgo
Published: February 2022

This article analyses the discussion regarding the tax assessment of Withholding Income Tax (WHT) on service fees paid from Brazil to other countries that have entered into a Double Tax Treaty with it. Mainly, after the judicial precedent known as Iberdrola case, the Brazilian Superior Court of Justice (STJ) left without analysis several issues that may play a role against future discussions on the qualification of such income under the treaty, namely the possible application of Article 12 and Article 14 to such stream of income.

Although the Iberdrola case was favourable to taxpayers, since it applied Article 7 to prevent Brazil from levying the WHT of service payments from Brazil to Spain, it has failed to discuss if the technical service fees would be qualified under Royalties – due to specific protocol stating so – or Independent Personal Services – due to specific wording of the Double Tax Treaties (DTTs) entered into by Brazil.

Due to this short-sided view of Brazilian courts, taxpayer should be aware that the precedents on the matter so far left out important issues to be examined, which can be crucial in case of a shift of position on the subject, in the near future.
A Tax Law Perspective of the Cooperation Council for the Arab States of the Gulf (the GCC)
Authors: Scalia Roberto
Published: February 2022

For quite a long time, tax scholars have been deserving little attention to the Cooperation Council for the Arab States of the Gulf (GCC) as an International Organization. Due to many factors, the discussion concerning taxation within the GCC has been increasing in recent times, so that the following question arises: what role, if any, the ‘GCC’ is ought to play in tax issues? The author addresses, in a comprehensive manner, the impact of GCC principles and rules on Tax issues, stemming from the founding instrument, the GCC Charter and the sc. Economic Agreement. An analysis through the founding instrument and subsequent agreements unveils that the GCC is a peculiar Regional Organization, able to achieve its challenging objectives (despite the lack of a ‘common’ Court). The GCC ‘economic integration’, achieved short after the establishment of a free-trade area, created for a ‘common market’ in which the ‘same treatment’ without ‘differentiation or discrimination’ is ensured. The article aims to enhance the discussion about the role of the GCC in a tax scholars’ perspective. Meanwhile, it is expected to be a useful guidance for both GCC Governments (moving ahead towards epical Fiscal Reforms) and practitioners (searching for clear and predictable solutions) as well.
The European Code of Conduct Group Becomes Increasingly Important in the Fight Against Tax Avoidance: More Openness and Transparency is Necessary
Authors: Nouwen Martijn F.
Published: February 2022

The European Code of Conduct Group is gaining importance in combating tax avoidance by multinational companies and any facilitation thereof through harmful tax competition between Member States. The importance of the Group in this area is steadily growing, as the Group has increasingly concerned itself with the design of a coordinated European taxation policy over the past few years. For example, they take far-reaching measures in the area of a common tax ruling policy, international hybrid mismatches and disclosure of aggressive tax planning schemes – to name just a few recent topics. In essence it qualifies as ‘pseudo-legislation’. Because of the enormous lack of openness and transparency, the work of this important Group, and the role played in this policy area by (the various) Member States, is often unknown territory for the general public. Through this article, the author attempts to change this. To this end, he discusses current issues the Group is dealing with. In addition, he explores a number of steps that could be taken to increase openness and transparency of the work of the Group.
A Brave New Post-BEPS World: New Double Tax Treaty Between Germany and Australia Implements BEPS Measures
Authors: Walker John , Maurer Ludmilla , Port Christian , Roth Tom
Published: February 2022

On 7 December 2016 a new Double Tax Treaty between Germany and Australia (‘Treaty’) entered into force. The Treaty was signed on 12 November 2015 and replaces the existing Treaty between both countries signed in 1972. The Treaty is one of the first double tax treaties to be concluded globally since the finalization of the OECD’s Base Erosion Profit Shifting (BEPS) Action Plan and thus represents a significant landmark on the global tax landscape that may indicate the trajectory of post-BEPS double tax treaties. The Treaty applies from 1 January 2017 in Germany and from 1 January 2017 (withholding tax), 1 April 2017 (fringe benefits tax) and 1 July 2017 (other Australian taxes) respectively in Australia.
Perspectives of the Concept of Result Regarding Assessment of Municipal Service Tax (ISS) on Exportation of Services: in Brasil
Authors: Tôrres Adriana Nogueira
Published: February 2022

The purpose of this study is to discuss the interpretation of administrative and judicial Courts in Brazil regarding municipal Tax on Services (ISS) in transactions involving exportation of services, since some courts have been interpreting the concept of result – whose occurrence in Brazil is what defines the application of ISS on exported services – as the conclusion of the services. This article demonstrates that interpretation is contrary to the principle of taxation at the destination, by which the good or service is taxed where it is consumed. This principle is adopted in Brazil and in more than 150 countries that have some form of value-added taxation (VAT), which includes taxes on services, such as the United Kingdom. The logic of the principle is to increase the competitiveness of national goods and services and avoid double taxation both at the origin and destination.
Italian Tax Authorities Action Against Fictitious Corporate Tax Residence
Authors: Valente Piergiorgio
Published: February 2022

Fictitious corporate tax residence is a primary concern for States, in view of the fact that it impacts – directly and incisively – on States’ taxing rights, and also since it is known to trigger double taxation as well as double non-taxation phenomena. Based on the above, it is quite evident that to counter such phenomena, a coordinated approach at international level is altogether imperative, especially since regulation of tax aspects has been playing an increasingly central role in debates and discussions between and among Tax Authorities, and international institutions.
Privacy and Confidentiality in Exchange of Information Procedures: Some Uncertainties, Many Issues, but Few Solutions
Authors: Mosquera Irma
Published: February 2022

The overall aim of this article is to analyse the taxpayers’ rights to confidentiality and privacy in exchange of information including the new global standard of automatic exchange of information. Section 2 will analyse the state of the art regarding the right to privacy and confidentiality in the OECD bilateral and multilateral instruments, in the Human Right Conventions and in case law by the European Court of Human Rights and the European Court of Justice. This section will also analyse the application of the right to privacy and confidentiality in practice mainly by identifying the problems of confidentiality and privacy arising in the disclosure of information, the exchange of trade secrets and the leak of information to the press and third parties. Subsequently, the authors explore the possibility to introduce a multilateral instrument to remedy these shortcomings.
The Substantive Scope of Tax Treaties in a Post-BEPS World: Article 2 OECD MC (Taxes Covered) and the Rise of New Taxes
Authors: Jescheck Christoph
Published: February 2022

Several countries have recently either introduced or announced plans for new taxes addressing base erosion and profit shifting by multinational enterprises. These taxes include the Indian Equalization Levy, the UK Diverted Profits Tax, the announced Australian Diverted Profits Tax, the Netherlands Excessive Severance Tax as well as the Belgian Fairness Tax. Moreover, US Republicans plan to substitute the corporation tax with a (destination based) cash flow tax. It remains uncertain whether these hybrid taxes are covered by tax treaties. The uncertainty relates both to the definition of an income tax according to Article 2(2) OECD MC and to the term ‘identical or substantially similar taxes’ pursuant to Article 2(4) OECD MC. Against this background of legal uncertainty, the authors favour a procedural solution introducing an obligation for the contracting states to reach a mutual agreement as to whether or not new taxes are covered by the tax treaty.
Limitation of Benefits Clause and Turkeys Approach: From Policy to Legal Order
Authors: Özgenç A. Selçuk
Published: February 2022

This article examines the Limitation of Benefits (LOB) Clause in the context of Turkish tax treaties and discusses it’s content from a comparative perspective based on current application. In that application, it seems that LOB Clauses bear the General Anti Avoidance Rule (GAAR) feature which it is not in line with OECD approach and undoubtingly it is open the criticism from the legal perspective.
Taxation of Digital Economy: An Indian Perspective
Authors: Singh Manoj Kumar
Published: February 2022

The concepts of taxation, essentially important to any governmental set-up, have been modified over time to suit the rapid changes in the economic system. One such example which could be taken here is that of multinational corporations (MNCs) or business entities operating in several tax jurisdictions. Their income and activities being based in multiple jurisdictions may be liable to tax in all of them but, to adhere to the principles of clarity in law and avoidance of double taxation, various concepts emerged, like that of the Permanent Establishment (PE). Such concepts aim at not only bringing predictability for the taxpayer but to balance the conflicting interests of, mostly, the developed nations and the developing nations. In addition to this, certain jurisdictions provide various tax concessions and benefits which can be manipulated by the tax payers so as to have income rendered untaxed Internet advertising is rapidly growing both in terms of revenue and share in the total advertising market. The volume of internet advertising reached USD 135.4 billion in 2014. The market for internet advertising is projected to grow at a rate of 12.1% per year during the period 2014 to 2019. As the stakes started rocketing, taxing such virtual transactions attained prominence. The existing provisions of the income-tax statute were unable to tie the noose around these transactions. Perhaps the reason is Indian income-tax legislation is still governed by physical presence test.

The search for new basis of taxation became inevitable. The question was whether the tax should be on consumption or income? Through the Union budget 2016, the government has put forth a proposal to impose an equalization levy at the rate of 6%. This levy is only on B2B Transactions. The author has discussed the features of the proposed equalization levy as per the Committee and the lacunae in the proposed levy will be looked into.

In the course of this article, the author seeks to briefly study the dimensions of digital economy and the problems so faced by the taxation regimes. Various recommendations have emerged from academicians and experts, the most prominent of them being the OECD/G20 Base Erosion and Profit Shifting Project, Action 1: 2015 Report (hereinafter referred to as ‘BEPS Report on Action 1’). The models so proposed under will be studied to understand the limitations. Further, in light of the ‘Equalization Levy’ so proposed by the Union Budget, 2016, the stance of the Indian government will be examined keeping in mind the observations of the Report of the Committee on Taxation of E-Commerce3 released in February 2016 (hereinafter referred to as ‘Indian Committee’). However, the author will not dwell into the issues of compliance and infrastructural requirements for each of the proposed solutions, including the one proposed to be adopted by the Indian Government. The scope is further restricted to taxation on income rather than Value Added Tax (VAT).
The Provisions of the EU Anti-Tax Avoidance Directive Regarding Controlled Foreign Company Rules: A Critical Review Based on the Experience with the German CFC Legislation
Authors: Moser Till
Published: February 2022

The EU Anti-Tax Avoidance (ATA) Directive of 12 July 2016 introduced common minimum standards for fighting tax avoidance practices by the Member States of the EU. Besides interest limitation rules, rules on exit taxation, general anti-abuse rules as well as measures against hybrid mismatches, the ATA Directive provides minimum standards for the treatment of Controlled foreign corporations (CFCs). It is evident that the respective provisions follow, at least partly, the handwriting of the German CFC Rules, which are the oldest within the European Union (EU) and rank among the oldest in the world. In this context, the following article critically reviews the provisions of the ATA Directive regarding CFC Rules, taking into account the experience with the German CFC legislation.
Indirect Transfer Taxation in India: From Vodafone to Cairn
Authors: Nagappan Meyyappan , Vasudevan Srikanth
Published: February 2022

Indirect transfers refer to situations where when foreign entities own shares or assets in India, the shares of such foreign entities are transferred instead of a direct transfer of the underlying assets in India. There are innumerable permutations to such indirect transfers, many of which have been sought to be taxed by the Indian Government in the recent past. Beginning from the Vodafone case involving a tax demand of approximately USD 2.1 billion, which was followed by knee-jerk amendments to the Income Tax Act annually, to the recent Cairn case involving a tax demand of approximately USD 1.6 billion, the imposition of this tax has taken quite a few twists and turns. This article seeks to summarize and present a brief timeline of the issues related to indirect transfers, including the unintended issues that arose and those that continue to remain unresolved. These unresolved issues present potential concerns for future investments into India and for current foreign investors with investments in India. Further recognizing that unilateral measures by countries in taxing indirect transfers can result in incoherence and uncertainty, the United Nations, International Monetary Fund, Organization for Economic Co-operation and Development and World Bank Group have come out with a draft paper aimed at achieving international consensus on this issue.
Interplay Between the Principal Purpose Test in the Multilateral BEPS Convention and the Beneficial Ownership Clause as Treaty Anti-Avoidance Tool Targeting Holding Structures
Authors: Palmitessa Elio Andrea
Published: February 2022

The signing of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), has enabled the participant jurisdictions to begin the process of implementing certain treaty-based Base Erosion and Profit Shifting (BEPS) recommendations into their network of double tax conventions. In line with Action 6 of the BEPS Plan, as per Article 7 of the MLI, a minimum anti-abuse standard provision to counter treaty shopping was introduced.

This article discusses the outcomes deriving from the application of the Principal Purpose Test (PPT), as default provision, and its possible interplay with the treaty anti-avoidance tool presented by the clause of the beneficial owner for tax treaty purposes. The analysis is supported by practical guidelines issued to holding companies, based on recent case law.
The Interaction of the Principal Purpose Test (and the Guiding Principle) with Treaty and Domestic Anti-Avoidance Rules
Authors: Chand Vikram
Published: February 2022

In the previous contribution, which carried out a detailed analysis of the principal purpose test (PPT), the author had indicated that interesting issues arise with respect to the interaction of the PPT (and the guiding principle) with other treaty based or domestic based anti-avoidance rules. In this contribution, the author, firstly, discusses the interaction of the test with the inherent anti-abuse rule. Secondly, the author discusses the relationship of this test with existing treaty general anti-avoidance rules (GAARs) and specific anti-avoidance rules (SAARs) such as the limitation of benefits clause, the beneficial ownership clause, holding/time period provisions introduced in the articles dealing with dividends/capital gains as well as the anti-abuse rule with respect to permanent establishments in a third State. Lastly, the author analyses the interaction of the PPT with domestic anti-avoidance rules such as judicial doctrines, statutory GAARs and SAARs. It is pertinent to note that this contribution should be read in conjunction with the author’s previous contribution published in the January edition of the journal.
Double Taxation Conventions in the Case Law of the CJEU
Authors: Lang Michael
Published: February 2022

This Essay analyzes the jurisdiction of the CJEU regarding the interpretation of Double Taxation Conventions, by examining the relevant case law of the CJEU. It further investigates the interplay between the Fundamental Freedoms and the Double Tax Conventions.
The Principle of Nexus or Genuine Link as a Keystone of International Income Tax Law: A Reappraisal
Authors: Gadžo Stjepan
Published: February 2022

In this article, the author analyses the legal status of the so-called ‘nexus principle’, i.e. the requirement that a qualifying connection exists between the state exercising its taxing power on the one hand and taxable subject and/or taxable object on the other. It is argued that the nexus principle forms part of general international law of income tax jurisdiction, since it has attained the status of international custom. Put differently, international customary law prohibits income taxation in the absence of both personal and territorial nexus. In the light of the well-established methodology for ascertaining international customary law, support for such conclusion is found mainly in relevant norms of tax treaty law and domestic tax laws. Accordingly, the nexus principle may be considered as a keystone of international income tax law.
A Historical Analysis of the BEPS Action Plan: Old Acquaintances, New Friends and the Need for a New Approach
Authors: González-Barreda Pablo A. Hernández
Published: February 2022

In 2012, public opinion focussed on what has been called ‘aggressive tax planning of multinational enterprises’. Since then, the G20 and OECD developed the Base Erosion and Profit Shifting (BEPS) Action Plan – a phenomenon that has received enormous attention. Despite this attention, the efforts, methodology and outcomes, and the instruments used to implement them, pose very little innovation. This article analyses the issues raised by the BEPS Action Plan from a historical perspective, showing that they remain grounded on the same basis of discussions that took place decades ago. This is probably because the project was triggered by a decrease in tax revenue, and not by an actual study of the failures of the system. The only real innovation of the BEPS Project is the change in the public state of mind and attitude towards tax planning, as well as a totally new way of developing international tax rules through consensus with the participation of a broad number of countries. Future steps should take advantage of this actual innovation, get rid of previous analysis and, taking into account of the current economic situation, study (1) the structure of the tax system and tax burden; (2) the jurisdiction to tax rules and the source and residence principles; and (3) the relationship between private law and tax law, i.e. legal personality and recognition of foreign persons and contracts. Without such in-depth analysis, any changes would be changes that only deepen already existent failing principles forming the base of the current system.
Debate: Taxes on Digital Services and the Substantive Scope of Application of Tax Treaties: Pushing the Boundaries of Article 2 of the OECD Model?
Authors: Jescheck Christoph
Published: February 2022

In response to base erosion and profit shifting by multinational enterprises, states increasingly complement their corporate income taxes with new taxes that seek to secure tax revenue otherwise lost under ordinary corporate income tax. The European Union also seems to favour a new tax on certain digital services as an interim measure, before the concept of a digital permanent establishment as the long-term tax policy goal can be agreed upon. The new taxes can be seen as either explicit treaty overrides or, more interestingly, falling outside the scope of existing tax treaties. This article examines when such new taxes really succeed in avoiding the scope of application of tax treaties and what impact they might have on the tax treaty landscape.
Country note: The Reasonable Time of Tax Proceedings in the Italian Legal System
Authors: Sabbi Luca
Published: February 2022

The judicial protection of the taxpayer’s fundamental rights is still not fully implemented in Italy nor even in Europe. Article 6 of the European Convention on Human Rights (the Convention) – with its dichotomy of ‘rights and civil obligations/criminal charges’ – avoids guaranteeing a full and an effective protection. EU law and the EU Charter of Fundamental Rights possess a strong and wider legal force, despite their being effective only within the competences under Article 5 of the EU Treaty. The jurisprudence of the Italian Supreme Court of Cassation currently still tends to exclude the automatic application of the guarantees of Article 6 of the Convention, even in tax penalty matters. In this context, the Italian Constitution and the so-called Pinto Law – which implements the remedy pursuant to Article 13 of the Convention to ensure that proceedings conclude within a reasonable time – should be taken into consideration. Although national legal systems cannot offer less protection than Conventional or EU law, it is entirely possible that national legal systems may provide greater protection than Conventional or EU law. From this perspective, the correct interpretation of Italian legal rules would allow the application of the principle of reasonable duration of proceedings, in the context of purely tax matters.
Case law note: The CJEU Confirms that the Amount of Interest Normally Payable Under National Law on Overpaid VAT Cannot Be Reduced
Authors: Herbain Charlène A. , Zheng Yi Lei , De Meyer Thomas
Published: February 2022

On 28 February 2018 the Court of Justice of the European Union (hereafter ‘CJEU’) ruled in the Nidera BV case (C-387/16) (CJEU, 28 Feb. 2018, Case C-387/16, Nidera BV, ECLI:EU:C:2018:121.) that Article 183 of the VAT Directive, read in the light of the principle of fiscal neutrality, must be interpreted as precluding a reduction in the amount of interest normally payable under national law on overpaid VAT which was not refunded in due time for reasons connected to circumstances not attributable to the taxable person, such as the high amount of that interest when compared with the amount of overpaid VAT, the period of time during which the overpayment was not refunded and the underlying reasons for this, as well as the losses actually incurred by the taxable person.

 In previous case it already became clear that overpaid tax must be refunded to the taxable person concerned within a reasonable period. If not, the taxable person must be compensated in the form of default interest. (Opinion AG, 28 Feb. 2018, Case C-387/16, Nidera BV, ECLI:EU: C:2017:740, paragraph 1.)
Mandatory Tax Arbitration: The Next Frontier Issue
Authors: Owens Jeffrey
Published: February 2022

This article looks at the increasing risk of cross border tax disputes as countries begin to implement in different ways the BEPS action plan, examines the existing mechanisms to minimize and resolve such disputes and then focus on the potential of mandatory tax arbitration to provide the certainty that business and governments need in an increasing uncertain political and economic environment.
Case law note: ECJ Clarifies Conditions for VAT Exemption on Import Followed by Intra-Community Supply or Transfer in Enteco Baltic Case
Authors: van Malder Elien
Published: February 2022

In the recent Enteco Baltic case, the Court of Justice of the European Union confirmed the application of the VAT exemption on the import of fuel from Belarus to Lithuania, which was then dispatched or transported to other Member States, without adhering to all the formalities provided for in Article 143(2) of Council Directive 2006/112/EC (the VAT Directive) as amended by the Council Directive 2009/69/EC (Directive 2009/69). Thus, the Court, once again, grants priority to material conditions over formal conditions.
Applying Modern, Disruptive Technologies to Improve the Effectiveness of Tax Treaty Dispute Resolution: Part 1
Authors: Turcan Laura , Govind Sriram , Dimitropoulou Christina
Published: February 2022

This comprehensive two-part article addresses how modern, disruptive technologies can be used to improve the effectiveness of tax treaty dispute resolution.

It is clear that international tax dispute resolution needs improvement. The OECD, the European Union and the United Nations have all recently taken measures to this effect by promoting the prevention and timely resolution of treaty-related disputes. However, none of these recommendations considers technology.

In this context, this article examines whether the emergence of new and disruptive technologies such as artificial intelligence, shared-data platforms, cloud-based solutions and blockchain could complement the mutual agreement procedure (MAP) and supplementary arbitration and render them more effective by speeding up the resolution, reducing costs and establishing trust between tax administrations and taxpayers.

To answer this question, in Part 1 of this article, the authors briefly analyse the main drawbacks of the existing tax treaty dispute resolution process from the perspective of various stakeholders. Next, the article focuses on the fundamental features of a few significant types of technology and analyses how they could improve this process.

In Part 2 of this article, the authors will use the analysis from Part 1 to make some specific suggestions as to how the technologies discussed can be used to improve the MAP and supplementary solutions, with an aim to encourage the above-mentioned policy organizations to consider the potential of disruptive technologies in their work.
Developing a Uniform Understanding of Income Classification: Everyones Business?  A Review of Business Income and the Criterion of Asset Management in Tax Treaty Interpretation
Authors: Schwibinger Stefan
Published: February 2022

Conflicts of qualification under tax treaties may result from the lack of a clear borderline between business income and investment income, with potential remedies existing to resolve this problem. To analyse the problem, this article first highlights the general roots of the distinction between different income categories and then specifically addresses the categories of business income and investment income by initially outlining their general characteristics and then reviewing their different understanding in a tax treaty context for selected countries. The issue is especially relevant for borderline cases, in which specific and unique case law has developed in each jurisdiction with respect to asset management that may cause conflicts of classification in cases where a tax treaty is applied. The article then introduces and evaluates two approaches that aim to resolve conflicts of classification, namely the principle of common interpretation and the new approach to Article 23A/B OECD-MC, with regard to their applicability in the field of income classification. The approaches are then applied to case studies, followed by a discussion of the results and potential limitations.
The DNA of the Principal Purpose Test in the Multilateral Instrument
Authors: Gomes Marcus Livio
Published: February 2022

This article provides a comprehensive analysis of the framework of the principal purpose test (PPT) included in the Multilateral Convention (MLI) designed by the OECD as part of the Base Erosion and Profit Shifting (BEPS) Action 6 Final Report, ‘Preventing the Granting of Treaty Benefits in Inappropriate Circumstances’, included in the BEPS Project. This article maps the primary and secondary elements generally used in a general antiavoidance rule (GAAR) to check the feasibility of these concepts in the PPT. Potential weaknesses are pointed out, as well as challenges for its legal implementation, application and interpretation. The article assesses the feasibility of the main features of the PPT as a general anti-treaty avoidance rule (GATAR) to be included in the tax treaties of the states and jurisdictions that joined the MLI. From this perspective, whether the PPT will prevent treaty abuse, treaty avoidance or aggressive tax planning without creating uncertainty and shifting too much discretionary power to tax administrations is one of the issues. Ultimately, the strengths of this provision will depend on the legislatures and courts in the near future.
Case law note: The Right to VAT Deduction and the ECJ: Towards Neutral and Efficient Taxation in the Single Market?
Authors: Varju Marton
Published: February 2022

The right to deduct input VAT is recognized in the VAT Directive as well as in the corresponding jurisprudence of the ECJ as a fundamental component of the EU VAT system. It ensures the neutrality of taxation in the common system of VAT and, through that, equal treatment and undistorted competition in the single market. The exercise of the right of deduction may, however, undermine the efficient operation of national and, with that, the EU system of turnover taxation. The Member States may be prevented from collecting the revenues due in their national territory or addressing fraud and other abusive conduct that threaten the interests of national and EU public finances. In response to these challenges, ECJ case law has made considerable efforts to give effect to both the market integration and the tax efficiency objectives of the common system of VAT and reconcile the relevant legal rules. Developments in recent judgments seem to ensure that the concerns of Member States which face severe problems with the efficiency of VAT as a result of widespread practices of fraud may also be taken on board.
Application of the Arms Length Principle to Physical Cash Pooling Arrangements in Light of the OECD Discussion Draft on Financial Transactions
Authors: Haller Alexander
Published: February 2022

Although cash pooling arrangements are one of the most important tools to facilitate efficient liquidity management within multinational enterprises (MNEs or group companies), the application of the arm’s length principle to these arrangements has not been sufficiently explored as yet. Against this background, this article critically discusses the transfer pricing aspects of physical cash pooling arrangements, especially in the light of the OECD’s recent Discussion Draft on Financial Transactions. Specifically, the article discusses the application of the arm’s length principle to cash pooling borrowings and deposits, guarantees issued in the context of the pooling arrangement, remuneration of the cash pool leader (CPL) as well as allocation of the cash pool benefit, in particular, the netting benefit and the volume discount. The authors also provide comments on the impact of the negative interest rate environment on cash pooling arrangements.
Mandatory Binding Arbitration in the BEPS Multilateral Instrument
Authors: Bravo Nathalie
Published: February 2022

Part VI of the MLI establishes the mandatory binding arbitration procedure. Since no consensus was reached among the participants in the BEPS Project on the adoption of the mandatory binding arbitration procedure as a mechanism to ensure the timely resolution of MAP cases, the treaty makers of the MLI designed flexible provisions for its implementation. Part VI of the MLI combines the use of optional provisions, alternative provisions and reservations. Thus, the question arises whether the MLI achieves a coordinated effect in regard to the implementation of the mandatory binding arbitration procedure, in spite of the high level of flexibility offered to its parties and signatories.

 

For answering this question, the article provides an in-depth analysis of the mandatory binding arbitration procedure adopted in the MLI and the policy reasons behind the decisions taken by the treaty makers to design the procedure in the form it is found in the MLI. Additionally, it illustrates how the mandatory binding arbitration procedure of Part VI of the MLI works with a focus on the effects of the reservation clauses and optional provisions that allow parties to customize the mandatory binding arbitration procedure. And, it explains how parties and signatories have availed themselves of the flexibility provided by the MLI in connection with the mandatory binding arbitration procedure.