Tax avoidance in the BEPS context - Reactions to avoidance and aggressive tax planning – The Role of SAARs and Linking Rules Joachim Englisch

Categorisation of SAARs / linking rules Domestic vs. treaty rules Placement depends on legal requirements / policy considerations Treaty SAAR / l.r.: self-executing or enabling provision Relevant for role vis-a-vis domestic AARs in effort to tackle BEPS Objective / purpose: Anti-abuse/anti-avoidance SAAR in a strict sense OR Anti-BEPS SAAR in a broader sense OR Level playing field / tax fairness SAAR (including linking rules) Potentially relevant for EU fundamental freedom assessment Relevant for tax policy choice: SAAR vs. GAAR/TAAR

SAAR vs. GAAR & TAAR: policy considerations Mere anti-avoidance instrument? Legal certainty Uniform application in Contracting States Likelihood of unintended int‘l double taxation Flexibility / “future-proof“ instrument Robustness against circumvention Targeted vs. “shotgun“-approach Complexity Legal traditions of the Contracting States Sometimes, a combination of SAAR & TAAR can be advisable

GAARs/TAARs: fallback rules to SAARs? Preliminary remark: “same level“ analysis BEPS Reports often advocates fallback role of GAARs However, the extent to which this is possible is ultimately an issue of interpretation Transaction/ arrangement covered by substantial scope of SAAR? Avoidance scheme / technique targeted by SAAR? SAAR criteria avoided (or escape clause criteria met) substantially and not merely artificially? (Only) If all three answers are positive, the subsidiary application of a GAAR should be excluded Different domestic legal backgrounds / traditions will influence the outcome → treaty clarification may be useful

Interaction: domestic & treaty (S)AARs / l.r. Preliminary remark: interaction of linking rules see Action 2 / II Treaty SAAR and domestic AAR If self-executing: application of domestic AAR unnecessary Treaty SAAR may limit the scope of application of domestic GAARs/TAARS, anti-avoidance doctrines, or SAARs Alternatively, treaty SAAR might have to be interpreted in the light of a corresponding domestic SAAR regime / concept Domestic SAAR / linking rule and treaty AAR No interaction if SAAR doesn‘t conflict with standard treaty rules Incl. situations where SAAR determines “facts of tax liability“ (unrestrained by / in absence of treaty SAARs to this effect) Otherwise: need for authorisation by express treaty AAR?

SAARs / linking r. in light of primary EU law Under current CJEU case law, many SAAR / l.r. proposals of the BEPS Reports cannot be reconciled with EU fund‘l freedoms (Only) DTC distribution / method rules shielded from scrutiny (Only) sometimes, modifications are possible (e.g. CFC, LOB) For full(er) BEPS SAAR implementation, CJEU would have to… Allow for standardised anti-abuse rules Assess allocation “SAARs“ as such (not as anti-abuse regimes) Allow for tax fairness considerations as “imperative interests“ Exceptionally, State aid concerns may also arise The ATAD would test some limits if adopted … … and might indeed improve chances of generous CJEU scrutiny

Joachim.Englisch@uni-muenster.de