handbook-tb

Preventing tax treaty abuseintended scope and operation of domestic rules. Being inside the textof the treaty, the possibility of a conflict is removed — the domestic lawprovisions need not be called upon to counter the abuse. The OECDAction Plan on BEPS suggests some similar approaches to be includedin the text of the OECD Model Convention and the Commentary.These recommendations are discussed further in section 2.3 below.The administrative requirements necessary to enjoy treaty benefitsmay also play a part in detecting and countering treaty abuse. 22Clearly, some evidence must exist to establish the entitlement of anon-resident to treaty benefits and States should consider carefullythe kind and the extent of the evidence that needs to be provided, theentity to whom this evidence should be provided and who is responsiblefor retaining this evidence. For income such as dividends, interest,royalties or gains, there may be a question whether treaty benefits aredelivered at source or whether non-resident taxpayers must apply tohave the relevant tax refunded to them. It may be appropriate for therevenue authority’s audit programmes to undertake subsequent confirmationand verification to ensure that the facts which justified thegranting of treaty benefits still exist. Part of this process may involveusing the exchange of information provisions of a bilateral treaty orthe Multilateral Convention on Mutual Administrative Assistance inTax Matters 23 to verify and detect instances of inappropriate access.This role that administrative systems can play in controllinginappropriate access to tax treaties is not discussed in the OECD ActionPlan on BEPS, but States should carefully consider how their administrativeregimes are established so that they both clearly deliver thebenefits that the treaty requires and have inbuilt safeguards that canimpede the inappropriate access of treaties. Clearly, excessive administrativeobligations have the potential to undermine the benefits that22See generally, paragraphs 100 ff. of the Commentary on Article 1 ofthe United Nations Model Convention. See also, Peter A. Harris, “Taxationof Residents on Foreign Source Income,” in United Nations Handbook onSelected Issues in Administration of Double Tax Treaties for Developing Countries,supra note 15.23OECD-Council of Europe, Convention on Mutual AdministrativeAssistance in Tax Matters, 2011, available at http://www.oecd.org/ctp/exchange-of-tax-information/ENG-Amended-Convention.pdf.289