INTM630240 - Royalty Withholding: Anti Treaty Shopping Rules: DTA tax avoidance arrangements
Arrangement
An arrangement for the purposes of S917A includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable.
DTA tax avoidance arrangements
A double taxation agreement (DTA) tax avoidance arrangement is one where the main purpose, or one of the main purposes, is to gain a tax advantage by virtue of a benefit of a DTA and that tax advantage is contrary to the aims of the relevant provision or provisions within the DTA.
This definition is in line with OECD BEPS Action Point 6 on Prevention of Treaty Abuse and the principal purpose test that is included in the OECD Model Tax Treaty following the 2017 update. This is supported by commentary explaining how this rule will operate and is to be interpreted. This commentary should be followed when applying S917A.
Tax advantage
FA13/S208 provides the definition of tax advantage, which includes:
- relief or increased relief from tax,
- repayment or increased repayment of tax,
- avoidance or reduction of a charge to tax or an assessment to tax,
- avoidance of a possible assessment to tax,
- deferral of a payment of tax or advancement of a repayment of tax,
- avoidance of an obligation to deduct or account for tax.
Main purpose, or one of the main purposes
The legislation does not define what is meant by a ‘main purpose’ or ‘one of the main purposes’. These expressions are to be given their normal meaning as ordinary English words. They have to be applied objectively, having regard to the full context and facts. Some examples are provided at INTM630270.