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CA Final · Direct Tax Laws & International Taxation · Fundamentals of BEPS

Under the BEPS Action 6 approach to preventing treaty abuse, the minimum standard requires countries to include in their tax treaties:

The Action 6 minimum standard requires treaties to state the intent of not creating non-taxation or reduced taxation, and to adopt a principal purposes test, or an LOB rule supplemented by an anti-conduit mechanism, or a PPT combined with LOB. A mandatory LOB alone is not required.

  1. AExpress language on non-taxation intent plus either a principal purposes test (PPT), a simplified or detailed limitation on benefits (LOB) rule with an anti-conduit mechanism, or a combinationCorrect
  2. BA mandatory limitation on benefits rule in every treaty, with no alternative
  3. COnly a domestic general anti-avoidance rule, with no treaty changes
  4. DA ban on all dividend and interest withholding in treaties

Explanation

The Action 6 minimum standard requires a statement that treaties are not intended to create non-taxation or reduced taxation through evasion or avoidance, and implementation through a PPT alone, a PPT plus LOB, or LOB plus a mechanism dealing with conduit arrangements. A mandatory LOB in all treaties is wrong because the PPT alone suffices.

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