Larisa Gerzova*

and Oana Popa**

International

Compatibility of Domestic Anti-Avoidance

Measures with Tax Treaties
This article discusses the issue of treaty override
through general domestic anti-avoidance
measures and, in particular, the question of
whether or not treaty override may be treated as
justified in cases of abuse.
1.Introduction
Tax treaties are, inter alia, aimed at providing certainty
with regard to international tax matters. The OECD
Report entitled Tax Treaty Override of 2 November 1989
(1989 Report)1 states that tax treaties are supposed to form
a firm and reliable basis for tax relations between states
in order to facilitate economic relations and encourage
flows of capital and labour. Tax treaties achieve this
through limiting and regulating the taxing jurisdiction of
the states entering into the treaties.2
The principal purpose of tax treaties, as stated in the
Commentary on the OECD Model (2010)3 is to promote,
by eliminating international double taxation, exchanges
of goods and services, and the movement of capital and
persons. Additionally, the Commentary on Article 1 of
the OECD Model (2000) and previous versions mentioned that tax treaties, [] should not [] help tax
avoidance or evasion.4 Paragraph 7 of the Commentary
on Article 1 of the OECD Model (2003), dealing with
the improper use of the tax treaty, added the point that
it is also a purpose of tax conventions to prevent tax
avoidance.5
While the tax avoidance purpose of tax treaties is now
clearly stated in the Commentary,6 it is a topic of debate
how this goal can be reached. It can be achieved through
the tax treaty itself (i.e. by including specific provisions
aimed at preventing particular forms of tax avoidance or

*
**
1.
2.
3.
4.
5.
6.

420

Senior Research Associate, IBFD. The author can be contacted at

l.gerzova@ibfd.org.
Senior Research Associate, IBFD and Editor of Corporate Investment
Income and Private Investment Income. The author can be contacted at o.popa@ibfd.org.
OECD Committee on Fiscal Affairs, Tax Treaty Override (OECD 1989),
International Organizations Documentation IBFD, reprinted in OECD,
Model Convention on Income and on Capital, Vol. II, R 8 (OECD 2010).
Id., paras. 1 and 2.
OECD Model Tax Convention on Income and on Capital: Commentary on
Article 1 para. 7, first sentence (22 July 2010), Models IBFD.
OECD Model Tax Convention on Income and on Capital: Commentary on
Article 1 para. 7 (29 April 2000), Models IBFD.
OECD Model Tax Convention on Income and on Capital: Commentary on
Article 1 para. 7 (28 Jan. 2003), Models IBFD.
Even though not widely accepted, see K. Vogel et al., Tax Treaties and
Domestic Law (G. Maisto ed., IBFD 2006), Online Books IBFD, section
5.4.1. (accessed 11 June 2013) for Stef van Weeghels opinion that it is
preferable to return to the wording of the Commentary as it was before
the 2003 changes.
EUROPEAN TAXATION SPECIAL ISSUE SEPTEMBER 2013

by interpreting a tax treaty in light of its purpose, according

to article 31(1) of the Vienna Convention (1969),7 or by
way of application of domestic anti-avoidance measures.
Sometimes, tax treaty partners derogate from their tax
treaty obligations by way of their domestic law. Such
unilateral acts frustrate the certainty that the tax treaty
aims to establish. States tend to justify the application of
domestic rules that overrule the terms agreed upon under
a tax treaty by relying on the objective of counteracting
abuse of the treaty by taxpayers.
The Commentary on Article 1 of the OECD Model (2003
and subsequent versions) specifies that, as a general rule,
there is no conflict between tax treaties and domestic
general anti-abuse measures (GAAR).8,9 In other words,
according to this statement (1) states may apply their
anti-abuse measures and tax treaties will be subsequently
applied taking into account the facts resulting from the
application of such rules or (2) domestic anti-abuse measures may function so as to deny access to treaty benefits
in cases of deemed abuse. Nevertheless, the Commentary
points out that it should not be lightly assumed that
transactions are abusive.
However, where the domestic legislation of a state may
take priority over the provisions of tax treaties10 (even
though the aim is to prevent abuse) this may trigger treaty
override, which is a prohibited practice under international law.
The extent to which the 2003 changes in the Commentary
on Article 1 of the OECD Model (2003)11 can be reconciled with the general denunciation of treaty override and
the issue of whether or not treaty override is acceptable
(i.e. where it is aimed at countering improper use of the
treaty) is highly debated and interpreted differently across
countries. The purpose of this article is to discuss the issue
of treaty override from the point of view of domestic and
international law, as well as to look at the issue of compatibility of tax treaties and domestic anti-avoidance rules in

7.
8.
9.

10.
11.

Vienna Convention on the Law of Treaties (23 May 1969), Treaties IBFD.
Para. 22 OECD Model: Commentary on Article 1 para. 22 (2010); the
present article does not discuss specific anti-avoidance rules regarding,
for example, CFCs and beneficial ownership.
This approach was also identified in S. van Weeghel, General Report,
IFA Cahiers de droit fiscal international, vol. 95a, p. 19 (Sdu Fiscale &
Financile Uitgevers 2010), Online Books IBFD, as follows: it seems that
in many countries the application of general anti-avoidance rules can be
reconciled with tax treaty obligations.
For example, in the United States, by way of the application of the lex
posterior derogate legi priori principle; see section 3.
OECD Model: Commentary on Article 1 (2003).
IBFD

Compatibility of Domestic Anti-Avoidance Measures with Tax Treaties

the light of the Commentary. It is also the intention to

answer the question of whether or not treaty override can
be justified.
In order to bring clarity to the discussion, it is useful to
first highlight some further explanations of the meaning
of relevant terms, such as tax avoidance/tax abuse, general
anti-avoidance measures and treaty override.
2.Relevant Concepts
2.1.Tax avoidance
As regards tax avoidance, there is no accepted universal
definition of the term. It is rather controversial, especially
with regard to the legitimacy of such a practice. While the
Oxford English Dictionary defines tax avoidance as the
arrangement of ones financial affairs to minimize tax liability within the law [emphasis added],12 the literature
discusses the thin line between tax evasion, tax avoidance
and tax planning,13 emphasizing the difficulty in differentiating between tax avoidance and tax planning. In
turn, the Commentary on Article 1 of the OECD Model
(2010) generally associates the term tax avoidance with
concepts such as improper use,14 abusive transactions15
and artificial constructions,16 giving to the term a negative connotation, in the sense of abuse. The Commentary
uses, interchangeably, throughout the text, the concepts
of tax abuse and tax avoidance and also the concepts
of anti-abuse provisions and anti-avoidance provisions
but does not define any of these terms. The ambiguity of
the term abuse for tax treaty purposes and the need for a
definition has also been expressed in the literature.17
Paragraph 9.5. of the Commentary on Article 1 of the
OECD Model (2010) contains a guiding principle,18
according to which:
[T]he benefits of a double taxation convention should not be
available where a main purpose for entering into certain transactions or arrangements was to secure a more favourable tax
position and obtaining that more favourable treatment in these
circumstances would be contrary to the object and purpose of
the relevant provisions.

There are, accordingly, two elements examined in determining if there is abuse of treaty provisions: first, whether
a transaction is mainly entered into for the purpose of
obtaining a more favourable tax treatment and second,
whether obtaining the more favourable tax treatment
would be contrary to the object and purpose of the relevant provisions.
It is clear that abusive use of treaty provisions is an illegitimate practice of taxpayers, but interpretation and
12. See http://oxforddictionaries.com/definition/english/tax-avoidance?q=
tax+avoidance.
13. R. Russo, Fundamentals of International Tax Planning, ch. 4 (IBFD 2007).
14. The fact that the purpose of tax treaties is to prevent tax avoidance is
stated in the OECD Model: Commentary on Article 1 (2010) under the
heading Improper use of the convention.
15. Para. 7.1 OECD Model: Commentary on Article 1 (2010).
16. Para. 8 OECD Model: Commentary on Article 1 (2010).
17. See A.J. Martn Jimnez, The 2003 Revision of the OECD Commentaries
on the Improper Use of Tax Treaties: A Case for the Declining Effect of the
OECD Commentaries?, 58 Bull. Intl. Taxn. 1 (2004), Journals IBFD.
18. Para. 9.5 OECD Model: Commentary on Article 1 (2010).
IBFD

identification of abuse of tax treaties based on the guiding

principle in the OECD Commentary is relative. Moreover,
when this is done unilaterally, by one of the treaty partners,
the risk is that abuse, as understood under domestic provisions, might go beyond abuse as intended by the guiding
principle in the Commentary. Different interpretations
of the dividing line beyond which the taxpayer will be
accused of abuse, if this is not regulated by the treaty itself
or is not based on mutual understanding, leave room for
mismatches in the assessment by states of this issue.
2.2.Anti-avoidance measures
As indicated by the name, anti-avoidance measures are
measures intended to combat the avoidance of tax. Such
measures may be of general application, for example, in
the form of a general anti-avoidance rule, or aimed at specific transactions or situations. General anti-avoidance
measures provide criteria of general application, i.e. not
aimed at specific taxpayers or transactions, to combat situations of perceived tax avoidance.19 Given the difficulties
in defining the line between legitimate tax planning and
tax avoidance, and in estimating how far the taxpayer can
go, within the limits of the law, in structuring its business
in a manner that is designed to minimize tax liability, it
makes it equally difficult to apply anti-avoidance rules. All
the more, when the domestic anti-avoidance measures of
a contracting state apply, abuse might be determined differently, creating conflicting situations.
2.3.Treaty override
In its 1989 Report, the OECD defined treaty override
as a situation where the domestic legislation of a State
overrules provisions of either a single treaty or all treaties
hitherto having had effect in that State.20 The Report
explains that such legislation may take two forms:
(1) legislation explicitly stating that tax treaty provisions
must be disregarded in certain circumstances (for
example, tax treaty abuse situations); and
(2) legislation making no direct reference to tax treaty
situations, but having the same effect as under (1)
through its interpretation.
As an illustration of treaty override by way of domestic
legislation, the 1989 Report provides an example of a contracting state, which, following the entry into force of a
tax treaty, and in reaction to actions of taxpayers, adopts
anti-abuse legislation aimed at reclassification of particular transactions, otherwise exempt under the treaty,
for the purpose of the application of its tax treaties. Such
a reclassification results in taxation. The Report takes the
view that even though the overriding measure is designed
to put an end to improper use of the tax treaty, its effect
could contravene this states tax treaty obligations.21
There may be different ways in which a tax treaty is not
complied with by a contracting state. For example, the
19. Definition of anti-avoidance measures and general anti-avoidance
rule, IBFD International Tax Glossary, 6th ed. (Julie Rogers-Glabush ed.,
IBFD 2009), Online Books IBFD.
20. 1989 Report, supra n. 1.
21. 1989 Report, supra n. 1, paras. 31 and 32.
EUROPEAN TAXATION SPECIAL ISSUE SEPTEMBER 2013

421

Larisa Gerzova and Oana Popa

1989 Report mentions that other situations, which either

involve or are similar to treaty override and may have the
same effect include, inter alia:
legislation that reverses a judicial decision that conflicts with the common interpretation of the treaty,
explicitly accepted or tacitly implied by the treaty
partners;
a change in the definition of a term used under
domestic law as a result of which the meaning of a
treaty term (generally the same term) also changes
through operation of the treaty provisions regarding
interpreting undefined terms; and
a change in domestic legislation that unintentionally
conflicts with a treaty provision.
The expression treaty override may also be compared
with the expression material breach used in the Vienna
Convention (1969), the two not necessarily being identical.
In turn, the Commentary on the OECD Model (2010)
does not refer to treaty override as such; however, it discusses what according to the authors view may constitute a particular form of treaty override unilateral application of domestic anti-avoidance rules.
For the purposes of this article, the authors consider treaty
override to be any unilateral derogation from tax treaty
obligations by way of the domestic legislation of one of
the contracting states.
3.Domestic Law Perspective
The approach of countries towards treaty override and,
in particular, the application of domestic anti-avoidance
measures, varies significantly.
Several countries submitted observations on the
Commentary provisions according to which domestic
general anti-avoidance rules do not conflict with tax
treaties. Accordingly, these countries approach towards
domestic anti-avoidance rules may deviate from the
OECD view and treaty override is more likely to be
encountered in such countries. Ireland opined that this
will depend on the nature of the domestic law provision
and also on the legal and constitutional relationship in
individual member countries between domestic law and
international agreements and law.22 Luxembourg submitted that a State can only apply its domestic anti-abuse
provisions in specific cases after recourse to the mutual
agreement procedure.23 The Netherlands observed that
the compatibility of such rules and provisions with tax
treaties is, among other things, dependent on the nature
and wording of the specific provision, the wording and
purpose of the relevant treaty provision and the relationship between domestic and international law in a
country.24 Switzerland stated that domestic tax rules on
abuse of tax conventions must conform to the general

provisions of tax conventions, especially where the convention itself includes provisions intended to prevent its
abuse.25
The interaction between domestic law and international
law depends on the constitutional order of particular
states (monistic or dualistic approach).26 This plays a
major role in the degree of acceptance of the compatibility
of domestic anti-avoidance measures with tax treaty provisions and a states tolerance towards treaty override. In
particular, where the approach under the Constitution
of a particular state is that tax treaties have priority over
domestic legislation, it is debatable how this remains
compatible with the approach in the Commentary on the
OECD Model (see section 1.).
Paragraph 22(1) of the Commentary on Article 1 of
the OECD Model mentions that domestic general antiavoidance rules, are part of the basic domestic rules set
by domestic laws for determining which facts give rise to
a tax liability.
Domestic anti-avoidance rules might apply to determine
(sometimes by recharacterization) the facts giving rise to
tax liability and a tax treaty subsequently applies, or such
rules might deny application of the tax treaty benefits in
situations characterized as abusive. The application of the
domestic anti-avoidance measures should be permitted in
the tax treaty context as long as they are within the scope
of the guiding principle of what constitutes abuse in the
Commentary, or if the two treaty partners have a mutual
understanding of abuse.
The national legal system of the contracting states determines how the international law is being applied in that
particular state. Looking at the practice of various countries, there are countries that override their treaties.
The United States overrides its treaties based on the lex
posterior derogat legi priori principle27 embedded in legislation and judicial practice. Accordingly, a law that is
inconsistent with a previously enacted treaty has priority
over the treaty provisions. It has been debated28 that the
practice of treaty override in the United States could be
justifiable in the light of the underlying purpose of the relevant treaty to prevent double taxation and double nontaxation.
Another country that, on several occasions, has overridden its treaties is Canada. Domestic legislation in
Canada provides that in the event of a conflict between
statutory general anti-avoidance rules and a tax treaty, the
GAAR prevails.29 The issue in Canada is not whether or
not the tax treaty might be overridden, but rather how to
identify abusive transactions.30
25.
26.
27.
28.

22.
23.
24.

422

Para. 27.5 OECD Model: Commentary on Article 1 (2010).

Para. 27.6 OECD Model: Commentary on Article 1 (2010).
Para. 27.7 OECD Model: Commentary on Article 1 (2010).
EUROPEAN TAXATION SPECIAL ISSUE SEPTEMBER 2013

29.
30.

Para. 27.9 OECD Model: Commentary on Article 1 (2010).

See S. Sachdeva, Tax Treaties Overrides: A Comparative Study of the Monist
and the Dualist Approaches, 41 Intertax 4 (2013).
For a detailed description of the US domestic legislation that allows for
treaty override, see A.C. Infanti in K. Vogel et al., supra n. 6, ch. 13.
R. S. Avi-Yonah, Tax Treaty Overrides: A Qualified Defence of US Practice
in K. Vogel et al., supra n. 6, ch. 4.
For details, see K. Vogel et al., supra n. 6, ch. 5.5.4.
For more details, see N. Goyette & P.D. Halvorson, Tax treaties and tax
avoidance: application of anti-avoidance provisions Canada, in IFA
IBFD

Compatibility of Domestic Anti-Avoidance Measures with Tax Treaties

Treaty overrides are, in principle, accepted as effective

from a domestic law perspective in Germany.31 Germany
justifies treaty override based on the need to fight abuse.32
In Australia, the legislation33 is structured to make it clear
that general anti-avoidance rules can apply in tax treaty
cases and prevail over provisions of a tax treaty.
In the current economic climate, states wish to protect
their tax base and to guard against abuses, and for this
reason, may adhere to the opinion that the provisions of
their tax treaties do not preclude domestic anti-avoidance
rules. There are surely moral arguments in favour of this
approach, if interpreted in the light of the legitimacy of
the objective pursued.
In the context of recent intensive debates over the tax
avoidance arrangements of large multinationals, such as
Starbucks,34 Amazon and Google,35 the notion of fair
share of tax has frequently been addressed. The premise
seems to be used as a justification for overriding some
legal provisions. In terms of treaty override, fair share of
tax and moral responsibility towards the society may be
used as justifications for the legitimacy of such a practice.
However, in light of the pacta sunt servanda principle in
the Vienna Convention (1969), treaty override is clearly
a breach of international law and such a breach cannot
necessarily be justified by the legitimacy of the objective
pursued (i.e. fighting abuse).
4.Treaty Override and International Law
4.1.In general
As stated in section 3., certain domestic legal systems treat
treaty override as legitimate. However, it is important to
point out that the constitutional position of a particular
contracting state does not change the states tax treaty
obligations under international law, which is indifferent
towards the monistic or dualistic solution chosen by a
given State.36 As such, treaty override, in principle, constitutes a breach of international law, irrespective of the
view on the issue taken by the contracting state.37
4.2.Vienna Convention
Tax treaties belong in the sphere of international law
and are governed, inter alia, by the rules of the Vienna
Convention (1969).
The Vienna Convention (1969) applies to treaties
between states38 and does not distinguish between tax
Cahiers, supra n. 9.
31. A. Linn, Tax treaties and tax avoidance: application of anti-avoidance
provisions Germany, in IFA Cahiers, supra n. 9.
32. A. Rust in K. Vogel et al., supra n. 6, ch. 9, Germany.
33. R. J. Vann, Tax treaties and tax avoidance: application of anti-avoidance
provisions Australia, in IFA Cahiers, supra n. 9.
34. See speech of David Cameron, the UK Prime Minister, on 23 January
2013 at the World Economic Forum in Davos, Switzerland, available at
www.bbc.co.uk/news/business-21176992.
35. http://www.bbc.co.uk/news/business-22878460.
36. J. Wouters & M. Vidal, The International Law Perspective, in K. Vogel et al.,
supra n. 6.
37. 1989 Report , supra n. 1.
38. Article 1 of the Vienna Convention (1969).
IBFD

treaties and other type of treaties. Article 2(1)(a) of the

Vienna Convention defines a treaty as an international
agreement concluded between States in written form
and governed by international law []. The Vienna
Convention regulates tax treaties that were concluded by
states after the entry into force of the Convention with
regard to such states.39 As regards tax treaties between
states that are not parties to the Convention or tax treaties
that were concluded prior to the entry into force of the
Convention, the principles of the Vienna Convention may
be applicable, as the Convention codifies the rules of customary international law.
Pacta sunt servanda is the guiding principle of international law, which must be applied by the contracting states
for the purposes of application of their tax treaties. Under
Article 26 of the Vienna Convention (1969) this principle is
worded as follows: Every treaty in force is binding upon the
parties to it and must be performed by them in good faith.
In turn, article 27 of the Vienna Convention explicitly
provides that a contracting party may not invoke the provisions of its internal law as justification for its failure to
perform a treaty.
As such, treaty override by way of application of domestic
legislation or interpretation of such legislation leading
to failure to perform a treaty, in principle, constitutes
a breach of states obligations under international law,
regardless of the permissibility of such an override under
domestic law.
4.3.Articles on the Responsibility of States for
Internationally Wrongful Acts
In addition to the Vienna Convention (1969), state
responsibility for non-compliance with treaty terms based
on national law can also be derived from the Articles on
the Responsibility of States for Internationally Wrongful
Acts (Articles on State Responsibility)40 as adopted by
the UN International Law Commission (ILC) in August
2001. On 12 December 2001, the United Nations General
Assembly adopted resolution 56/83,41 which brought the
articles to the attention of governments without prejudice to the question of their future adoption or other
appropriate action. While most of the articles codify
existing customary international law, the Articles on State
Responsibility are not legally binding on states.
Article 3 of the Articles on State Responsibility confirms
the principles set out under the Vienna Convention
(1969) as follows: The characterization of an act of a State
as internationally wrongful is governed by international
law. Such characterization is not affected by the characterization of the same act as lawful by internal law.
39. Article 4 of the Vienna Convention (1969).
40. Articles on Responsibility of States for Internationally Wrongful
Acts, Report of the International Law Commission on the work of its
Fifty-third session, Official Records of the General Assembly, Fifty-sixth
session, Supplement No. 10 (A/56/10), Chap. IV.E.1. See also Wouters &
Vidal, supra n. 36 and H. Pijl, State Responsibility in Taxation Matters, 60
Bull. Intl. Taxn. 1 (2006), Journals IBFD.
41. UNGA Res. 56/83 of 12 November 2001 (A/RES/56/83), available
at
http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/56/
83&Lang=E.
EUROPEAN TAXATION SPECIAL ISSUE SEPTEMBER 2013

423

Larisa Gerzova and Oana Popa

In turn, article 32 of the Articles on State Responsibility

confirms the irrelevance of internal law as regards international obligations of states.42

5.Conclusion

Under this article, the necessity argument may be invoked

as a ground for arguing that an act not in conformity with
an international obligation of a state is not wrongful if
such an act:
(1) is the only way for the state to safeguard an essential
interest against a grave and imminent peril; and

As was described in this article, treaty override

is a condemned practice in the international tax
arena. However, some states, in an effort to protect
against taxpayer abuse, override their treaties and
domestically validate this practice through provisions
such as the lex posterior derogat legi priori principle,
or, simply, legislate the possibility of intentionally
overriding treaties arguing that they need to prevent
abuse. In most cases where states override tax treaties,
they do so in order to tackle abuse. While the morality
of fighting treaty abuse is not subject to debate, it is
important to confirm whether states, when overriding
their treaties, are in line with their international
obligations.

(2) does not seriously impair an essential interest of the

state or states towards which the obligation exists, or
of the international community as a whole.

Even though some states may believe otherwise,

in general, there is no such thing as justified treaty
override from an international law perspective.

As Wouters and Vidal (2006) point out, where a contracting state introduces legislation expressly overriding
a tax treaty, such a contracting state may argue that their
unilateral action was necessary in order to avoid abuse
of tax treaties.45 However, it must be noted on the basis of
the strong language used in article 25, for example, the
only way, essential interest, against grave peril and the
example given by the quoted experts pointing toward the
direction of tax evasion rather than tax avoidance,46 that
the cumulative conditions of article 25 of the Articles on
State Responsibility appear to be very strict and not easy
to apply to any circumstance of abuse.

Under international law, treaty override is prohibited.

In its 1989 Report, the OECD, referring to the norms
of international law, condemns treaty override even
though in a number of cases the legitimacy of the
objective pursued in particular where they aim
at counteracting abuse of conventions is well
founded.47

However, the Articles on State Responsibility provide

a number of circumstances affirming that certain acts
of a state towards another state, for example, acts based
on consent, self-defense, force majeure, etc. are not
wrongful.43 One such circumstance is a state of necessity
under article 25 of the Articles on State Responsibility.44

4.4.Remedies
The 1989 Report explains that where a treaty partner
overrides the treaty, the international law gives the other
party two possibilities: (1) to require repeal or, at least,
non-application of the relevant legislation, and (2) to terminate or suspend the tax treaty as provided under article
60 of the Vienna Convention (1969).
The fact that a country is known for practicing treaty
override has an impact on the international economic,
political or social reputation of the respective country.
However, termination of a tax treaty is an extreme step,
which may be economically more harmful and lead to
poor relations with the other state. Supposedly, instead
of unilateral treaty override, treaty partners may consider
engaging in a dialogue, consultation, renegotiation and
inclusion of anti-avoidance provisions in their tax treaties.

42. Article 32 of the Articles on State Responsibility provides that the

responsible state may not rely on the provisions of its internal law as a
justification for failure to comply with its obligations under this part.
43. Articles 20-26 of the Articles on State Responsibility.
44. See Pijl, supra n. 40, at pp. 44-45 and Wouters & Vidal, supra n. 36, at ch.
2.2.2.
45. Wouters & Vidal, supra n. 36, at ch. 2.2.2.
46. Wouters and Vidal consider that the state of necessity might only be
legitimately invoked in very restricted circumstances (such as massive
tax fraud endangering the continuity of public services).

424

EUROPEAN TAXATION SPECIAL ISSUE SEPTEMBER 2013

The Vienna Convention (1969) provides that tax

treaties must be performed in good faith. The
provisions of a tax treaty to which a country agrees
must be binding. Should the country wish to protect
itself against abusive transactions it has to negotiate
and include anti-avoidance provisions in the tax
treaty, together with a clear and agreed indication
as to what constitutes abuse. This would avoid
many conflicts. When a country applies domestic
anti-avoidance provisions, it may interpret abuse
according to its own perception and the treaty partner
might not be of the same view.
By way of exception, the Articles on State
Responsibility provide the grounds for removing
the wrongfulness of the actions of a contracting state
(for example, treaty override) in the state of necessity,
which is, however, not easy to apply.
The 2003 changes to the Commentary on the OECD
Model (2003) state that domestic anti-avoidance rules
are not in conflict with tax treaties. The application of
domestic anti-abuse provisions does not, in principle,
conflict with tax treaties, as long as abuse is not
lightly assumed to have taken place and when both
contracting states have the same understanding of
abuse. The Commentary contains a guiding principle
regarding what abuse is. Contracting states have the
same understanding of abuse if special provisions
are included in the tax treaty or when domestic
anti-avoidance measures are within the scope of the

47.

1989 Report, supra n. 1., para. 34.

IBFD

Compatibility of Domestic Anti-Avoidance Measures with Tax Treaties

guiding principle in the Commentary or of any other

mutually agreed definition of abuse.
When countries have a mutual understanding of what
abuse is, the application of domestic anti-avoidance
measures does not breach their reciprocal trust and

taxpayers have the legal certainty that their rights will

not be unilaterally abused. In such cases, domestic
anti-avoidance measures may be seen also as mutually
agreed conditions and their application would not
necessarily constitute treaty override as such.

Cumulative Index
Articles
Austria
Andreas Baumann and Karin Simader:
Debt-Financed Acquisitions of InterCompany Shareholdings Recent
Developments 55
Croatia
Ivana Kireta:
Tax Incentive Regimes in Croatia,
Macedonia (FYR) and Serbia Should
They Compete?

215

Denmark
Thomas Booker:
Beneficial Ownership

164

European Union
Luca Cerioni:
Removing Cross-Border Tax Obstacles
for EU Citizens: Feasibility of a
Far-Reaching One-Stop-Shop Regime
for Mobile Workers and Investors
194
The Final Word on the Free
Movement of Companies in Europe
following the ECJs Vale Ruling and a
Further Exit Tax Case?
329
Giampaolo Genta:
Dividends Received by Investment
Funds: An EU Law Perspective
Part 1
Dividends Received by Investment
Funds: An EU Law Perspective
Part 2

80
141

IIgnacio Gordillo Fernndez de Villavicencio:

Applying the Merger Directive
beyond its Scope in Third-Country
Scenarios: An Alternative Approach to
A Oy (Case C-48/11) Part 1
2
Applying the Merger Directive
beyond its Scope in Third-Country
Scenarios: An Alternative Approach to
A Oy (Case C-48/11) Part 2
62
Marjaana Helminen:
The Problem of Double Non-Taxation
in the European Union To What
Extent Could this be Resolved through a
Multilateral EU Tax Treaty based on the
Nordic Convention?
306
Joao Santos Pinto:
The Role of the Concept of Control
under CFC Legislation within the
European Union vis--vis Third
Countries 94

IBFD

Thorsten Vogel and Benjamin Cortez:

Recent Developments and Resulting
Implications Regarding a Financial
Transaction Tax in Europe

135

Dennis Weber:
Abuse of Law in European Tax Law:
An Overview and Some Recent Trends
in the Direct and Indirect Tax Case
Law of the ECJ Part 1
251
Abuse of Law in European Tax Law:
An Overview and Some Recent Trends
in the Direct and Indirect Tax Case
Law of the ECJ Part 2
313
Italy
Pietro Mastellone:
Religion and Taxation in Italy: The
Principle of Lacit and Compliance
with EU Law 

Sweden
Emilie Parland and Mattias Lindblad:
Tax Treatment of Transaction Costs

Switzerland
Prof. Dr Xavier Oberson:
The Development of International
Assistance in Tax Matters in Switzerland:
From Evolution to Revolution
368
United Kingdom
Dr Christiana HJI Panayi:
The EUs Financial Transaction Tax,
Enhanced Cooperation and the UKs
challenge358
Dr Karolina Tetak:
UK Tax Breaks for the 2013 UEFA
Champions League Final

378

Macedonia
Ivana Kireta:
Tax Incentive Regimes in Croatia,
Macedonia (FYR) and Serbia Should
They Compete?

215

158

224

Special Issue Articles

Bibliography
Mirela Mikic:
Selective Bibliography on Tax Treaty
Override475

Norway
Rainer Zielke:
The Use of the Norwegian Petroleum
Tax Regime in International Tax
Planning 30

Editorial Note
Tams Kulcsr and Julie Rogers-Glabush
Treaty Override: Reviving a
Long-Forgotten Debate in the Name of
Anti-Avoidance 
411

Portugal
Alexandre Andrade and
Tiago Ferreira de Lemos:
Special Arrangements Applicable to
Mergers, Demergers, Transfers of Assets
and Exchanges of Shares: The Portuguese
Perspective 207

European Union
Dr Ren Offermanns:
Restrictions on Treaty Override Resulting
from EU Law
430
Tonia Pediaditaki:
FATCA and Tax Treaties: Does It Really
Take Two to Tango?
426

Serbia
Gordana Ili-Popov and Svetislav V. Kosti:
The Construction Permanent
Establishment under Serbian Domestic
and Tax Treaty Law
265

France
Dr Noah Gaoua and Alexis Ribeiro:
French CFC Legislation: An Illustration
of Recovery from a Tax Treaty Override
Situation 451

Ivana Kireta:
Tax Incentive Regimes in Croatia,
Macedonia (FYR) and Serbia Should
They Compete?

Germany
Andreas Perdelwitz:
Treaty Override Revival of the Debate
over the Constitutionality of Domestic
Treaty Override Provisions in Germany 445

215

Spain
Ana Mara Delgado Garca and
Rafael Oliver Cuello:
Direct Taxation of Electronic Commerce
in Spain
17

[continued on page 457]

EUROPEAN TAXATION SPECIAL ISSUE SEPTEMBER 2013

425