Resumen de LOB clauses and EU-Law compatibility: a debate revived by BEPS?
Filip Debelva, Dina Scornos, Jan Van den Berghen, Pieter Van Braband
In the light of the much-discussed BEPS report, the OECD proposes to implement more effective anti-avoidance measures to be included in international instruments. Limitations on Benefits (LOB) rules are mentioned as one of the possible anti-treaty abuse rules. The compatibility of these clauses with the EU law can be questioned.
The purpose of this article is to provide for an in depth analysis regarding the compatibility of the OECD LOB clause with the Fundamental Freedoms. The authors will first briefly set out the context in which LOB clauses are generally inserted (Part 1). Thereafter, the existing CJEU case-law on LOB clauses will be discussed (Parts 2-4). Lastly, the tests contained in the OECD LOB clause will be assessed in the light of the prevention of tax avoidance as a possible justification ground (Part 5).
Assuming that the OECD LOB clause is considered to only target 'wholly artificial arrangements', the authors are of the opinion that a correctly applied discretionary relief clause can lead to the fact that the LOB clause is proportionate to attain the aim of combating tax avoidance and evasion. In this respect, it is important that no undue administrative constraints are imposed on the taxpayer.
