Tax Compliance Regulations

𝗚𝗼𝗼𝗱 𝘁𝗮𝘅 𝗮𝗱𝘃𝗶𝗰𝗲 𝘀𝗵𝗼𝘂𝗹𝗱 𝘄𝗶𝘁𝗵𝘀𝘁𝗮𝗻𝗱 𝗷𝘂𝗱𝗶𝗰𝗶𝗮𝗹 𝘀𝗰𝗿𝘂𝘁𝗶𝗻𝘆, 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝘀𝗼𝘂𝗻𝗱 𝗰𝗼𝗺𝗳𝗼𝗿𝘁𝗶𝗻𝗴. 𝗧𝗵𝗲 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁’𝘀 𝗧𝗶𝗴𝗲𝗿 𝗚𝗹𝗼𝗯𝗮𝗹 𝗿𝘂𝗹𝗶𝗻𝗴 𝘀𝗵𝗼𝘄𝘀 𝘁𝗵𝗮𝘁 𝘁𝗿𝗲𝗮𝘁𝘆 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝘀 𝗳𝗼𝗹𝗹𝗼𝘄 𝘀𝘂𝗯𝘀𝘁𝗮𝗻𝗰𝗲, 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗮 𝗧𝗥𝗖. The Supreme Court’s decision in Tiger Global reinforces a principle that has existed in tax jurisprudence for decades: treaty benefits are not available where structures are driven by treaty shopping, tax abuse, or lack of commercial substance. 𝑂𝑣𝑒𝑟 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟𝑠, 𝐼 ℎ𝑎𝑣𝑒 𝑐𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑡𝑙𝑦 𝑤𝑟𝑖𝑡𝑡𝑒𝑛 𝑎𝑐𝑟𝑜𝑠𝑠 𝑣𝑎𝑟𝑖𝑜𝑢𝑠 𝑝𝑢𝑏𝑙𝑖𝑐𝑎𝑡𝑖𝑜𝑛𝑠 𝑠𝑢𝑐ℎ 𝑎𝑠 The Economic Times, Taxsutra 𝑡ℎ𝑎𝑡 𝑡𝑟𝑒𝑎𝑡𝑦 𝑏𝑒𝑛𝑒𝑓𝑖𝑡𝑠, 𝑖𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑔𝑟𝑎𝑛𝑑𝑓𝑎𝑡ℎ𝑒𝑟𝑖𝑛𝑔, 𝑎𝑟𝑒 𝑖𝑛𝑡𝑒𝑛𝑑𝑒𝑑 𝑜𝑛𝑙𝑦 𝑓𝑜𝑟 𝑔𝑒𝑛𝑢𝑖𝑛𝑒 𝑎𝑛𝑑 ℎ𝑜𝑛𝑒𝑠𝑡 𝑡𝑎𝑥𝑝𝑎𝑦𝑒𝑟𝑠. Substance, commercial rationale, and alignment with the object and purpose of the treaty have always mattered. 𝗧𝗵𝗲 𝗧𝗶𝗴𝗲𝗿 𝗚𝗹𝗼𝗯𝗮𝗹 𝗿𝘂𝗹𝗶𝗻𝗴 𝗱𝗼𝗲𝘀 𝗻𝗼𝘁 𝗰𝗿𝗲𝗮𝘁𝗲 𝗮 𝗻𝗲𝘄 𝗹𝗮𝘄; 𝗶𝘁 𝗰𝗹𝗮𝗿𝗶𝗳𝗶𝗲𝘀 𝗮𝗻𝗱 𝗿𝗲𝗮𝗳𝗳𝗶𝗿𝗺𝘀 𝘄𝗵𝗮𝘁 𝘄𝗮𝘀 𝗮𝗹𝘄𝗮𝘆𝘀 𝗶𝗺𝗽𝗹𝗶𝗰𝗶𝘁. Predictably, concerns are now being raised about investor sentiment, retrospective scrutiny, etc. Equally predictably, the same arguments once used to sell the idea that “TRC is sufficient” may now be repackaged to suggest that all past transactions are vulnerable. Both extremes miss the point. The real takeaway for taxpayers is simpler and more enduring: seek guidance that is legally sustainable, not merely appealing. Structures that are robust in substance, governance, and intent will continue to stand the test of time, even as judicial guidance evolves. 𝗜𝗻 𝘁𝗮𝘅, 𝗮𝘀 𝗶𝗻 𝗹𝗶𝗳𝗲, 𝘄𝗵𝗮𝘁 𝘀𝗼𝘂𝗻𝗱𝘀 𝘀𝘄𝗲𝗲𝘁 𝘁𝗼𝗱𝗮𝘆 𝗺𝗮𝘆 𝗻𝗼𝘁 𝘀𝘂𝗿𝘃𝗶𝘃𝗲 𝘁𝗼𝗺𝗼𝗿𝗿𝗼𝘄. 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗰𝗼𝗿𝗿𝗲𝗰𝘁 𝘂𝘀𝘂𝗮𝗹𝗹𝘆 𝗱𝗼𝗲𝘀. #InternationalTax #TaxTreaties #SupremeCourt #SubstanceOverForm #CommercialSubstance #GAAR #TaxAdvisory #TigerGlobal #TRC #taxabuse #taxevasion #interpretations #courts #opinions #treatyshopping

The application of the anti-abuse rules in the EU. The fragmented landscape of the EU direct taxation means that we have multiple anti-abuse rules (to name the obvious: see the relevant rules in the ATAD, in the PSD, in the IRD, in the mergers directive), slightly varying in their wording but, arguably, covered by the general principle of EU law of prohibition of abuse that has been proclaimed by the Court of Justice (in the Danish BO cases, amongst others). The interpretation of the various anti-abuse rules in the EU presents a challenge. I expect that a homogeneous (not just convergent) approach is adopted, despite the slight differences in the wording of the different rules. The recent judgment of the Court in the Nordcurrent case (C-228/24) is interesting as it is the first case on the PSD GAAR. It concerns the question of whether a genuinely established trading company that became a letterbox company over time can be qualified as an artificial arrangement set up in order to avoid taxes. I found extremely valuable analysis of the case and of the reasoning of Court in the note prepared by Adam Zalasiński and published in IBFDs European Taxation a couple of weeks ago. Adam points out that the answers given by the Court in the different questions referred to it by the Lithuanian court, do not always provide for the desired precision as to the application of the PSD-GAAR. Still, it does contain guidance helping us navigate the complexities of the application of the anti-abuse rule of the parent-subsidiary directive (and also of the other anti-abuse rules). What we can keep from the case. I agree with Adam in his conclusion: the case shows that not all companies with little substance constitute artificial arrangements set up for tax planning purposes; a meagre physical presence in another MS may not be necessarily motivated by a tax saving intention, which is indispensable in order to ascertain an abusive arrangement. You can read the paper here: https://lnkd.in/gs7kHQ8Z

Case-law: When another passive holding company gets caught in the tax net! Denial of the participation exemption regime (Court of Appeal of Mons, 21 January 2026) On 21 January 2026, the Court of Appeal of Mons denied the application of the DRD Regime on dividends (approx. 22mio €) distributed by a Belgian company to its Belgian parent company, based on the specific anti abuse provision of the PSD (Art. 203, §1, 7° ITC). 1️⃣ A passive holding company 🔸 The Court considered that the use of the holding company was abusive based on the following arguments: ➡️ The holding had a very limited degree of substance. Its activity was limited to the holding of two subsidiaries. Its income amounted to 6k € per year (to cover the operational costs). No employees. No infrastructure... 🫣 ➡️ The holding was set up for the main purpose of obtaining a tax advantage (DRD Regime) contrary to the purpose of the PSD. According to the judge, the holding was non genuine/artificial. ➡️ The dividend distribution occurred only a few days after the incorporation of the holding / the transfer of the participations to the holding 🫣. ➡️ The dividends received were used by the holding to finance the share price. The amount of the dividends was almost equal to the share price.... 🫣 2️⃣ Even domestic dividend distributions may be targeted ☀️ This court case echoes the judgement issued by the Tribunal of First instance of Bruges on 21 October 2024 (denial of the withholding tax exemption on dividends between two Belgian companies, based on Art. 266, (4) ITC). In this case, the holding also lacked economic substance... 🤔 This case-law shows that the participation exemption regime may be challenged even in the case of dividend distributions between two Belgian companies! 3️⃣ Paradigm shift Tax practitioners have seen a huge paradigm shift during the last couple of years. The economic substance of holding companies is becomingly increasingly important (even in a pure domestic context), which can be explained by the adoption of numerous anti-abuse rules in the international tax arena (#GAAR) For other recent examples: 🔸 The Johson Controls case (Trib. Leuven, 6 June 2025, see also my previous post👇) : application of the DRD Regime rejected on dividend distributions made by a UK company to a Belgian company (on the basis of the EU principle of prohibition of abuse). 🔸 The Primus Case (Court of Appel of Ghent, 1 December 2020): denial of the withholding tax exemption of the Parent-Subsidiary Directive on dividend distributions made by a Belgian company to a SOPARFI, on the grounds that the latter lacked economic substance (no genuine economic activity in Luxembourg), based on the EU principle of prohibition of abuse. Key takeaway: The substance of holding companies is crucial. Even for domestic groups! #GAAR #holding #abuse #substance

Principal Purpose Test: 1. With a view to curb tax avoidance across various developed and developing countries, OECD Action Plan 15 provided for development of a Multilateral Instrument (‘MLI’) to counter abuse of Tax treaties or Tax treaty network for gaining tax advantages. 2. Under the MLI provisions, Article 7 (which deals with prevention of treaty abuse and is applicable as a minimum standard) prescribes Principal Purpose Test (‘PPT’) as one of the measures to prevent treaty abuse. 3. While India has opted for the PPT rule under MLI, it has also implemented General Anti-Avoidance Rules (‘GAAR’) under its domestic law for countering tax abuse, which also provided for Principal Purpose Test (‘PPT’). 4. As per Article 7 of MLI, PPT reads as below: “Notwithstanding any provisions of a Covered Tax Agreement, a benefit under the Covered Tax Agreement shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the Covered Tax Agreement” 5. Thus, the PPT rule provides for denial of treaty benefits when one of the principal purposes is to obtain tax benefit. 6. Domestic law of India provides for application of GAAR to Impermissible Avoidance Arrangement (‘IAA’). To determine an arrangement as Impermissible Avoidance, section 96 of Indian Income Tax Act provides for PPT rule. The same is read as under: “An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit” 7. Thus, GAAR applies when main purposes is to obtain tax benefit. 8. It is imperative that taxpayers review their investment structures into India considering these provisions as well as the risk of potential litigation which may arise. 9. There will be an increasing thrust on demonstrating a commercial need at each stage to be substantiated by adequate documentation and this would apply even for existing structures. TaxByte by CA Aniket Kulkarni

The Criminal Finances Act 2017 introduced the offence of Failure to Prevent the Facilitation of Tax Evasion, with criminal conviction bringing an unlimited fine. Until recently, many organisations may have considered the risk low. That assumption is no longer safe. What’s often misunderstood is just how wide this offence can bite. 👉 Any fraudulent activity intended to divert funds from public revenue can amount to the common law offence of Cheating the Public Revenue. 👉 This means the scope is far broader than what most would narrowly define as “tax evasion.” 👉 Crucially, a conviction of the individual taxpayer is not required before a corporate prosecution can proceed. The prosecution only needs to prove, beyond reasonable doubt, that the taxpayer-level offence was committed, even if HMRC has chosen not to criminally charge that individual. With the first corporate charged under this offence just last month, and growing criticism that the legislation had been underused, it’s clear this is firmly back on the agenda for HMRC. For the corporate boardroom, the message is simple: 🔒 The only defence is having reasonable prevention procedures in place. This doesn’t mean a one-off risk assessment filed away in a drawer. It means active monitoring, training, and ongoing action. The risk is real. The expectations are high. The time to act is now. Are you confident your organisation has reasonable procedures in place? If not, let’s talk. #HMRC #CriminalFinanceAct #Tax

Tax authorities implement anti abuse rules, exchange information and data analysis to battle tax evasion and aggressive tax planning. Here are few important rules to stay safe and to benefit without struggles: Rule 1 : Let the location of the company be the real place of management (“management & control”): make sure you collect evidence that important decisions for the company are made at its seat: strategy, signature of important contracts, attendance of management of the company (meeting minutes) and much more. Hint: if you do not have time to be there, employ a manager or let one of your employees be manager of the foreign company, but make sure in the management contract that he/she is really at the site of the company. Rule 2: Avoid unplanned “permanent establishments”: criteria for unplanned permanent establishment can be according to Art. 5 of the OECD model tax convention: a fixed place of business through which the business of an enterprise is wholly or partly carried on; an agent with authority to conclude contracts in the name of the enterprise; permanent services that last longer than 6-12 months, depending on the double tax treaty. If the manager of a company in a country with reasonable taxation has his residence in another country, no written correspondence should be done or kept in that other country in order to avoid any assumption that the place of effective management could be in the country of residence. #corporatetax #eutaxation #uaecorporatetax #antiabuserule #internationaltaxation #transferpricing #permanentestablishment

✍️ ⚖️ 𝗛𝗼𝗹𝗱𝗶𝗻𝗴 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀, 𝗦𝘂𝗯𝘀𝘁𝗮𝗻𝗰𝗲 & 𝗔𝗯𝘂𝘀𝗲 — 𝗡𝗲𝘄 𝗗𝘂𝘁𝗰𝗵 𝗥𝘂𝗹𝗶𝗻𝗴𝘀 📌 On 𝟭𝟴 𝗝𝘂𝗹𝘆 𝟮𝟬𝟮𝟱, the 𝗗𝘂𝘁𝗰𝗵 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 issued two key decisions involving 𝗕𝗲𝗹𝗴𝗶𝗮𝗻 𝗽𝗲𝗿𝘀𝗼𝗻𝗮𝗹 𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗮𝗻𝗱 𝗱𝗶𝘃𝗶𝗱𝗲𝗻𝗱 𝘄𝗶𝘁𝗵𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝘁𝗮𝘅 (WHT) — denying the exemption on the basis of 𝗮𝗯𝘂𝘀𝗲, even where formal substance existed. 𝗪𝗵𝘆 𝗱𝗼𝗲𝘀 𝘁𝗵𝗶𝘀 𝗺𝗮𝘁𝘁𝗲𝗿? 👉 Because it’s a 𝘁𝗲𝘅𝘁𝗯𝗼𝗼𝗸 𝗰𝗮𝘀𝗲 of how the 𝗘𝗨 𝗰𝗼𝗻𝗰𝗲𝗽𝘁 𝗼𝗳 𝗮𝗯𝘂𝘀𝗲 is evolving — and how it will increasingly affect 𝗕𝗲𝗹𝗴𝗶𝗮𝗻 𝘁𝗮𝘅 𝗽𝗹𝗮𝗻𝗻𝗶𝗻𝗴, particularly where dividend flows, holding structures, and anti-abuse rules intersect. 🔎 𝗪𝗵𝗮𝘁 𝗵𝗮𝗽𝗽𝗲𝗻𝗲𝗱? Two Belgian holding companies held shares in a Dutch feeder vehicle. → One was more active (office, external management, small investments). → The other was passive (no office, no employees, only assets: 2 classic cars). → Both were family-owned and funded. The Dutch tax authorities 𝗰𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝗱 𝘁𝗵𝗲 𝗪𝗛𝗧 𝗲𝘅𝗲𝗺𝗽𝘁𝗶𝗼𝗻, invoking the 𝗣𝗮𝗿𝗲𝗻𝘁-𝗦𝘂𝗯𝘀𝗶𝗱𝗶𝗮𝗿𝘆 𝗗𝗶𝗿𝗲𝗰𝘁𝗶𝘃𝗲’𝘀 𝗮𝗻𝘁𝗶-𝗮𝗯𝘂𝘀𝗲 rule, now harmonised with EU law. 🧨 The 𝗗𝘂𝘁𝗰𝗵 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 𝗰𝗼𝗻𝗳𝗶𝗿𝗺𝗲𝗱 𝗮𝗯𝘂𝘀𝗲, aligning with EU case law (including Nordcurrent), stating: 1️⃣ 𝗦𝘂𝗯𝘀𝘁𝗮𝗻𝗰𝗲 𝗮𝗹𝗼𝗻𝗲 = 𝘀𝘂𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝘁 You must show that the shareholding is functionally tied to a business activity. Merely having an office or holding other assets won’t do. 2️⃣ 𝗖𝗼𝗻𝘁𝗿𝗼𝗹 𝗺𝗮𝘁𝘁𝗲𝗿𝘀 If the family UBOs retain discretion over the dividend use, courts may disregard corporate separation. This strengthens the case for abuse. 3️⃣ 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝘀 𝗲𝘃𝗼𝗹𝘃𝗲 Even structures set up for valid commercial reasons may become artificial over time, especially if passive elements are introduced or substance weakens. 📎 This echoes the recent 𝗡𝗼𝗿𝗱𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗰𝗮𝘀𝗲 (CJEU, April 2025), confirming that “non-authentic arrangements” can arise at any stage. 🇧🇪 𝗜𝗠𝗣𝗔𝗖𝗧 𝗙𝗢𝗥 𝗕𝗘𝗟𝗚𝗜𝗨𝗠: In my practice, I see growing convergence in how abuse is assessed — across countries and across tax rules, e.g.: 🔹 𝗖𝗙𝗖 𝗿𝘂𝗹𝗲𝘀 🔹 “𝗖𝗮𝘆𝗺𝗮𝗻 𝘁𝗮𝘅” 🔹 𝗧𝗵𝗲 𝗣𝗮𝗿𝗲𝗻𝘁-𝗦𝘂𝗯𝘀𝗶𝗱𝗶𝗮𝗿𝘆 𝗗𝗶𝗿𝗲𝗰𝘁𝗶𝘃𝗲’𝘀 𝘀𝗽𝗲𝗰𝗶𝗳𝗶𝗰 𝗮𝗻𝘁𝗶-𝗮𝗯𝘂𝘀𝗲 𝗿𝘂𝗹𝗲𝘀 🔹 𝗧𝗵𝗲 𝗴𝗲𝗻𝗲𝗿𝗮𝗹 𝗮𝗻𝘁𝗶-𝗮𝗯𝘂𝘀𝗲 𝗿𝘂𝗹𝗲 These cases confirm: ✅ “Substance” must be linked to the 𝗮𝗰𝘁𝘂𝗮𝗹 𝘀𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗶𝗻𝗴 ✅ “Economic purpose” must be proven — and 𝗸𝗲𝗽𝘁 𝗮𝗹𝗶𝘃𝗲 ✅ Passive holdings are under 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗶𝗻𝗴 𝘀𝗰𝗿𝘂𝘁𝗶𝗻𝘆 🎯 𝗧𝗵𝗲 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆? ⚠️ Don’t assume that having “some” substance will shield your structure. 📌 𝗔𝘀𝘀𝗲𝘀𝘀 𝗳𝘂𝗻𝗰𝘁𝗶𝗼𝗻𝗮𝗹 𝗹𝗶𝗻𝗸𝘀. 📌 𝗝𝘂𝘀𝘁𝗶𝗳𝘆 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗹𝗼𝗴𝗶𝗰. 📌 𝗥𝗲𝘃𝗶𝘀𝗶𝘁 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝘀 𝘁𝗵𝗮𝘁 𝗵𝗮𝘃𝗲 “𝗺𝗮𝘁𝘂𝗿𝗲𝗱” 𝗽𝗮𝘀𝘀𝗶𝘃𝗲𝗹𝘆 𝗼𝘃𝗲𝗿 𝘁𝗶𝗺𝗲.