The relationship between treaties and domestic anti-abuse provisions

Article by: Jonathan Schwarz (Temple Tax Chambers; King’s College London) – First published on KluwerTaxBlog

In last month’s blog I promised to address the treaty aspects of  Davies and Others v HMRC [2020] UKUT 67 (TCC). The case concerned UK resident individuals who each took out a life insurance policy with a Bermuda insurer under which their entitlements were linked to a Mauritian company that developed land in the UK.

In 2003, the OECD introduced controversial commentary on the relationship between domestic anti-abuse measures and tax treaties. It asserted that a general rule, there is no conflict between such rules and tax treaties (2003 Commentary to article 1, paras 9.1 to 9.6 and 22 to 22.2). This discussion is expanded considerably in the 2017 OECD Commentary (Commentary to article 1, paras 66 to 80). The later Commentary distinguishes between specific and general legislative anti-abuse rules.

In large measure, this Commentary is made redundant by the PPT introduced in the MLI and new treaties that adopt article 29(9) of the 2017 OECD Model, at least in relation to misuse of treaties.

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