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The Prevention of Tax Treaty Abuse in the BEPS Action 6: A Brazilian Perspective

In the context of the OECD BEPS project, Action 6 (‘Prevent treaty abuse’) is considered to be a key element in the reform of the current international tax regime, calling for an immediate reaction by all countries. The OECD studies and reports on this subject regard treaty shopping and rule shopping as abusive practices that must be tackled in order to prevent international base erosion. It is clear that this subject requires more in-depth consideration by tax policymakers. It is mandatory to seek a point of convergence under this subject that reconciles the interests of tax administrations of OECD member countries, which are conducting and implementing the BEPS Action Plan, and the interests of taxpayers, who assert their need for legal certainty in the structuring of their business activities. This article analyses the OECD proposal to prevent ‘treaty abuse’; investigates the feasibility and consequences of the inclusion of a limitation-on-benefits provision or a principal-purpose test in income tax treaties and, in particular, whether such specific anti-avoidance rules are consistent with the Brazilian tax system.