The ATAD's GAAR: A Pandora's Box?

13 Pages Posted: 22 Sep 2017

Date Written: May 1, 2017


This paper elaborates on the provision on tax abuse in the EU’s Anti Tax Avoidance Directive (‘ATAD’): the general anti-abuse rule (‘GAAR’). The GAAR allows EU Member States to disregard for company tax purposes any non-genuine arrangements that have been put in place to defeat the object or purpose of applicable tax legislation with a view to reducing the effective tax burden. This EU Member States are required to transpose it into their domestic laws by 1 January 2019. Substantively, the provision has been lifted from anti-abuse doctrines found in primary EU law and anti-abuse provisions found in secondary EU law. However, the language in the legislative text seems able to be interpreted in a much more extensive way than its counterpart doctrines in primary EU law are currently interpreted. When interpreting the concept of abuse in the field of the treaty freedoms, the CJEU has so far consistently held that tax abuse is absent in the presence of economic substance, i.e., regardless of whether the legal arrangements are driven by any tax motives. The GAAR provision in the ATAD, however, suggests a weighing of tax motives and non-tax motives, thus implying that abuse may be present even in the presence of economic substance or, in other words, that a legal arrangement or series of arrangements may constitute tax avoidance if the economic substance involved – in terms of relative size or importance – does not outweigh that of the tax benefits sought. This means that the ATAD’s GAAR could potentially extend to cover a much wider range of scenarios than traditional CJEU anti-abuse case law and hence could potentially add a whole new dimension to anti-tax avoidance approaches in the EU. If called upon, the CJEU could either stick to its classical primary EU law anti-abuse doctrines or perhaps – encouraged by societal developments and a widened legislative provision – choose to broaden the scope of these doctrines and, therefore, lower the bar for EU Member States wishing to counter any perceived undue use of the tax system. Did the EU Member States perhaps open a Pandora’s box when they adopted the Directive provision?

Keywords: Tax Avoidance, Tax Abuse, Company Taxation, General Anti Abuse Rule

JEL Classification: H25, K34

Suggested Citation

de Wilde, Maarten Floris, The ATAD's GAAR: A Pandora's Box? (May 1, 2017). Available at SSRN: or

Maarten Floris De Wilde (Contact Author)

Erasmus University Rotterdam ( email )

3000 DR Rotterdam
+31(0)104081647 (Phone)
+31(0)104089179 (Fax)


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