The OECD BEPS Action 6 report contains a principal pur- pose test rule (PPT rule) for the purpose of combating abuse of tax treaties. This PPT rule is also included in the OECD Multilateral Instrument. The PPT rule is (amongst others) applicable when ‘it is rea- sonable to conclude’ that a benefit (granted by a tax treaty) was one of the principal purposes of any arrangement/ transaction. This requirement contains two elements: the reasonableness test and the principal purpose test. In literature it is observed that (i) the reasonableness test of the PPT rule could be contrary to the European Union’s principle of legal certainty; (ii) that the OECD PPT rule gives the tax authorities too much discretion and, therefore, is not in line with EU law and (iii) there is doubt whether the OECD PPT rule contains a genuine economic activity test and therefore is in contravention of the abuse of law case law of the CJEU. In this contribution, I defend that none of the above-mentioned reasons the OECD PPT rule is contrary to EU law. The only potential problem I see is that the OECD PPT rule is broader (no artificiality required) compared to the GAARs in Anti-Tax Avoidance Directive and the Parent–Subsidiary Directive.

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Keywords GAAR, abuse, tax avoidance, BEPS, principal purpose test, legal certainty
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Series Erasmus Law Review
Journal Erasmus Law Review
Weber, D. (2017). The Reasonableness Test of the Principal Purpose Test Rule in OECD BEPS Action 6 (Tax Treaty Abuse) versus the EU Principle of Legal Certainty and the EU Abuse of Law Case Law. Erasmus Law Review, 10(1), 48–59. doi:10.5553/ELR.000081