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An overview by STI Taxand, Taxand Cyprus
The OECD’s Principal Purpose Test (PPT), a key anti-avoidance measure in international tax treaties, has been interpreted differently by courts around the world. While the PPT has been widely adopted, with over 100 countries signing the Multilateral Instrument (MLI) covering nearly 1,950 treaties, courts lack consistent precedents to guide its application.
Christos A. Theophilou from STI Taxand, Taxand Cyprus has authored an article, published in Bloomberg Tax examining these divergent interpretations through two landmark cases. The Alta Energy Luxembourg case in Canada highlighted a taxpayer-friendly approach, where the Supreme Court prioritised treaty predictability and dismissed abuse allegations, despite claims of treaty shopping. In contrast, the Molinos Rio case in Argentina supported the tax authority’s reliance on domestic anti-avoidance rules to challenge a structure enabling double non-taxation, emphasising economic substance and the treaty’s intent to prevent abuse.
You can read the full article in further detail here.
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