The OECD has published a public discussion draft on its BEPS Action Item 6: Preventing Treaty Abuse. Comments by interested parties are due by 9 January 2015. A link to the draft is attached for reference:
Some key points:
- Comments are invited on the Limitation of Benefits (LOB) clause re: interaction with Competent Authority (CA) relief
- Alternative LOB provision for EU countries?
- “Active business” test of the LOB: clarification/application
- Process for approval to apply the “Principal Purpose” test for disallowing treaty benefits
- Interaction of domestic and treaty anti-abuse rules
This Action item is very comprehensive and will also serve as a blueprint for some countries designing unilateral legislation. Accordingly, the LOB and Principal Purpose tests, among other complex provisions in the draft, should be reviewed to convey its terms succinctly and simply to others not well versed in the technical intricacies to promote further understanding and practical application.