Whether the domestic anti-abuse legislation applies to deny the tax treaty benefits

Abstract: The question raised in this thesis – whether the domestic anti-abuse legislation applies to deny the tax treaty benefits – cannot be decided unambiguously. As controversial debate shows, it is rather difficult to elaborate the uniform international approach concerning this issue due to a number of arguments: the incorporation of double tax treaties into domestic law takes place differently in various countries; some countries do not have GAAR at all, while others have well developed doctrines or an express statutory provision, or even the combination of both; also, some states explicitly define the relationship between the tax treaties and the GAAR, whilst others do not. Therefore, the problem in this thesis is considered from two opposite angles: in general with regard to OECD guidance and specifically from the particular state perspective. Through comparing and analyzing of the OECD approach to the problem in issue and particular country perspective, the author envisages some common principles in interaction between domestic GAARs and double tax conventions. It is also determined whether OECD approach (the factual and interpretative one) fits adequately the real domestic situations in question. The assessment is based on two fundamental. The first is the certainty of the law and pacta sunt servanda. The second is the purely domestic interests of each individual state purporting to protect its tax base. If certainty in tax outcome is to be preferred by a country, then the treaty should override the GAAR; if the prevention of tax abuse is the objective, then the GAAR should override the treaty. The third approach considered by this paper seems to be more compromise, permitting the GAAR to take precedence over the treaty, unless there is a conflict in which the treaty prevails.