Action Plan 6 – Prevention of Treaty Abuse - International Taxation - Income Tax

..... taxation through tax evasion or avoidance, including through treaty-shopping arrangements. The following preamble now appears in the 2017 OECD Model Tax Convention: Intending to conclude a Convention for the elimination of double taxation with respect to taxes on income and on capital without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this Convention for the indirect benefit of residents of third States) Three Methods of Addressing Treaty Shopping Jurisdictions have also committed to implement that common intention through the inclusion of treaty provisions in one of the following three forms: a principa .....

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Action Plan 6 Prevention of Treaty Abuse - International Taxation - Income Tax

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..... s of companies that derive their value primarily from immovable property; situations where an entity is resident of two Contracting States, and situations where the State of residence exempts the income of permanent establishments situated in third States and where shares, debt-claims, rights or property are transferred to permanent establishments set up in countries that do not tax such income or offer preferential treatment to that income. The report recognises that the adoption of anti-abuse rules in tax treaties is not adequate to address tax avoidance strategies that seek to circumvent provisions of domestic tax laws; these must be addressed through domestic anti-abuse rules, including through rules that will result from the work o .....

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Action Plan 6 Prevention of Treaty Abuse - International Taxation - Income Tax

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..... fy the tax policy considerations that, in general, countries should consider before deciding to enter into a tax treaty with another country . The policy considerations described in that section should help countries explain their decisions not to enter into tax treaties with certain low or no-tax jurisdictions; these policy considerations will also be relevant for countries that need to consider whether they should modify (or, ultimately, terminate) a treaty previously concluded in the event that a change of circumstances (such as changes to the domestic law of a treaty partner) raises BEPS concerns related to that treaty. Implementation of Action Plan 6 The latest peer review on the implementation of the Action 6 minimum standard reveals .....

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Action Plan 6 Prevention of Treaty Abuse - International Taxation - Income Tax

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..... Action 6 as part of its negotiations and in the final version of the tax treaty. The India-Hongkong tax treaty signed on 18th March 2018 contains the anti-avoidance provisions under Article 28 - Miscellaneous Rules of the tax treaty. Article 28 specifically mentions that the domestic law will override DTAA wherever there is tax evasion or tax avoidance. Further, legal entities not having bona fide business activities will not be eligible for treaty entitlement. The said treaty also incorporates the PPT provisions. Apart from the blanket rule on purpose test for avoidance or evasion of tax under Article 28, other articles in the substantive provisions viz. Articles 10-12 Article 14, also contain a specific clause in the respective articles, .....

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Action Plan 6 Prevention of Treaty Abuse - International Taxation - Income Tax

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..... led to this benefit. A shell or conduit company has been defined as any legal entity falling within the meaning of resident with negligible or nil business operations or with no real and continuous business activities carried out in that Contracting State. A resident of a Contracting State is deemed to be a shell/conduit company if its expenditure on operations in that Contracting State is less than Mauritian rupee 15,00,000 or Indian ₹ 7,00,000 in the respective Contracting State as the case may be, in the immediately preceding period of 12 months from the date the gains arise. LoB clause in India-Singapore Tax Treaty - On similar lines, India and Singapore has signed a protocol amending the India-Singapore tax treaty. Capital gains .....

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Action Plan 6 Prevention of Treaty Abuse - International Taxation - Income Tax

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