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The OECD’s public discussion draft ‘BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances’ proposed a series of rules for the OECD model. The draft for Article X, ‘‘Entitlement to Benefits,’’ the first five paragraphs of which are described therein as ‘‘specific antiabuse rule aimed at treaty shopping’’, are meant to establish a limitation on benefits provision. Article X(6) contains a general antiabuse rule.The analysis carried out here shows that upon closer examination, the proposed antiabuse rule turns out to have no legal relevance. Yet the mere existence of this rule will cause uncertainty, and individual tax administrations and courts will not be deterred from using it as a basis for the denial of treaty benefits. Similar and equally justified criticism would also be directed against any other tax rule that makes combating tax avoidance subject to a combination of objective and subjective requirements.When it is not certain whether an arrangement chosen by a taxpayer is covered by a treaty provision, practitioners will not ask for the object and purpose of the treaty provision but will apply a vague antiabuse provision instead, and the facts will be assessed based on the practitioner’s legal instinct and not from the law. Alternatively, tax administrations and courts will be tempted to restrict themselves to the alleged clear wording and to ignore the object and purpose of the legal provisions.If, however, the OECD cannot be prevented from introducing a general antiabuse rule similar to Article X(6) into the model, it will not only impair the quality of the OECD model but will also contribute to its loss of significance because not all states will be able to accept such a rule in their treaties.

BEPS Action 6: Introducing an Antiabuse Rule in Tax Treaties