The Prohibition of Abuse of Rights after the ECJ Danish cases Analysis of the ECJ judgments, reading by national courts, and impact on tax treaty practice
Intertax, vol. 49, issue 6/7, pp. 482–516
35 Pages Posted: 14 Dec 2021
Date Written: April 5, 2021
Since they were delivered in February 2019 the judgments of the Court of Justice of the European Union (ECJ) in the well-known ‘Danish cases’ have already been referred to by several courts of EU Member States to tackle alleged cases of directive shopping. In light of the increased convergence between EU and current OECD standards (notably the Principal Purpose Test), the findings of the ECJ will likely also have an impact in tax treaty practice and with respect to corporate structures involving dividends, interest or royalties. Against this background, this article discusses the findings of the ECJ in light of EU law but also contrasts these findings with tax treaty law and practice, including the rules of the Vienna Convention on the Law of Treaties (VCLT). Following an analysis of the prohibition of abuse of rights under EU and tax treaty law, the authors test the indicators of abuse in concrete cases by distinguishing inter alia between wholly artificial (sham) arrangements, on the one hand and ‘real’ business structures driven by tax motives, on the other hand. Finally, the impact of the ECJ findings on the interpretation of beneficial ownership is considered by taking into account recent tax treaty case law involving the 2014 OECD Commentary.
Keywords: tax law, international tax, eu tax law, ECJ, CJEU, abuse, beneficial ownership, OECD, tax treaty
Suggested Citation: Suggested Citation