OECD, EU and other international bodies are continuously encouraging countries to introduce anti-avoidance measures to counter “harmful tax practices” undertaken by taxpayers. Tax authorities are cooperating to an extent never seen before. Information and knowledge is exchanged at a massive scale. Various groups are coming together study how companies are obtaining deductions or avoiding tax in different jurisdictions. The routing of payments through different countries by using beneficial articles in double tax treaties is being countered. Anti-avoidance provisions and limitation of benefit articles are included in the majority of the latest tax treaties. “Anti-conduit” legislation is under way for most of the world countries. Schemes which trap profits in low tax jurisdictions are attacked. Controlled Foreign Company provisions are being updated or introduced at an increasing rate. Transfer pricing legislation is on the rise. In other words… welcome to the new world of transparency and substance!
Anti-avoidance measures are incorporated in domestic legislation in an effort to prevent transactions having tax saving as the only (or the most important) purpose. Each country has its own version but the core is the same.