Domestic Anti-Abuse Rules and Double Taxation Treaties: A Spanish Perspective – Part I

Bulletin for International Taxation - Journal - IBFD, 2002

12 Pages Posted: 27 Jul 2014

Date Written: November 1, 2002

Abstract

The relationship between domestic anti-abuse rules and double taxation treaties is a complex and unsettled issue. This is evidenced by the 2000 OECD Model Tax Convention, which notes in the Introduction (Para. 41), as did the previous versions of the Introduction, that the OECD Fiscal Affairs Committee continues to study the improper use of tax treaties and international tax evasion. The complexity of this topic increases if the following considerations are taken into account:

1) The standard for the anti-abuse provisions of tax law is not the same in every country. Some countries have a bias toward legal certainty (i.e. the taxpayer must always know in advance the tax consequences of his acts), which means that these legal systems may not accept general clauses against abuse/avoidance of tax law. Other countries defend the theory (already discarded in Spain) that the tax norm, as a norm that restricts individual rights, must be interpreted strictly and cannot therefore be applied beyond the strict wording of a provision. Still other countries have a more rigid anti-abuse standard in their tax system.

2) General anti-abuse clauses are not the only means by which a tax system reacts to tax avoidance or evasion. Many norms in international tax law are designed to counteract specific cases that are regarded as examples of tax avoidance (e.g. thin capitalization rules and controlled foreign company (CFC) legislation). This means that, in the last decades, the international tax world has witnessed a dramatic increase in the number of anti-abuse rules, especially anti-abuse rules aimed at dealing with particular cases. These rules exist in national tax systems together with general anti-abuse clauses and tax treaties; the interaction between all these norms creates problems that are difficult to solve.

3) The international initiatives on harmful tax competition depend on the effective application of internal anti-abuse norms to treaty-protected situations. If general antiabuse norms cannot be applied in a tax treaty context, the entire process of fighting harmful tax competition may slow down dramatically.

4) In Spain’s tax system, the General Tax Law (Ley General Tributaria, hereafter “GTL”) has three general anti-abuse instruments that the tax administration may use: Art. 24 GTL (fraus legis), Art. 25 GTL (simulation) and Art. 28(2) GTL (qualification). The scope of these three tools is not entirely clear, especially if it is noted that the tax jurisprudence in Spain has added a fourth instrument the “indirect business” theory (the “indirect business” is usually the means to achieve fraus legis; this theory is therefore redundant if Art. 24 GTL (fraus legis) is taken into account).

Keywords: Tax Law, International taxation, OECD, Anti-abuse clause, Tax trieaties

JEL Classification: H26, H25, H87, K33, K34

Suggested Citation

Martin Jimenez, Adolfo, Domestic Anti-Abuse Rules and Double Taxation Treaties: A Spanish Perspective – Part I (November 1, 2002). Bulletin for International Taxation - Journal - IBFD, 2002, Available at SSRN: https://ssrn.com/abstract=2471818

Adolfo Martin Jimenez (Contact Author)

Universidad de Cádiz ( email )

Facultad de Derecho, Avda de la Universidad, s/N
Jerez de la Frontera, Cádiz 11405
Spain

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