The Interaction of Domestic Anti-Avoidance Rules with Tax Treaties

Tax avoidance schemes, including cross-border tax avoidance schemes, are counteracted at the domestic law level through the application of domestic anti-avoidance rules such as judicial doctrines, statutory general anti-avoidance rules or statutory specific anti-avoidance rules. The issue then arises as to what is the impact of tax treaties on such domestic anti-avoidance rules. In general, it is accepted that tax treaties are rules that limit domestic law and if a conflict arises between the domestic law and tax treaty –the latter prevails. However, whether this position is correct with respect to domestic anti-avoidance rules is highly questionable, especially, in light of the controversial update to the OECD Commentary in 2003, the update to the UN Commentary in 2011 and the OECD/G20 BEPS deliverables. Accordingly, in this work, the author analyses the interaction of domestic anti-avoidance rules with tax treaties, in particular, the question of whether the effects of applying domestic anti-avoidance rules, from a source or residence States perspective, can be curtailed by tax treaties. The analysis takes into consideration the various changes proposed by the BEPS Action Plan, notably, Action 6 on preventing treaty abuse and Action 15 on the Multilateral Convention. Moreover, the thesis makes policy recommendations in the form of treaty provisions that States can incorporate in their tax treaty network in order to ensure that conflicts do not arise between domestic anti-avoidance rules and tax treaties.