ZLOUPOTREBA UGOVORA O IZBEGAVANJU DVOSTRUKOG OPOREZIVANJA: PREPREKA ODRŽIVOM POSLOVANJU
TAX TREATY ABUSE: AN OBSTACLE TO SUSTAINABLE BUSINESS

Author(s): Dejan Popović, Gordana Ilić Popov
Subject(s): Business Economy / Management, Fiscal Politics / Budgeting, Accounting - Business Administration, ICT Information and Communications Technologies
Published by: Finrar d.o.o Banja Luka
Keywords: BEPS Action Plan; digitalization of business; international double taxation; tax treaty abuse; Multilateral Instrument; sustainable business; tax treaties;
Summary/Abstract: Since double taxation threatens global business, double taxation treaties are the most effective instruments to eliminate or mitigate the adverse consequences of such tax phenomenon. The rules on conflict of tax laws contained in tax treaties determine which of the competing tax jurisdictions – the state of residence or the state of source – shall have the priority of taxing rights. The authors’ hypothesis is that in the modern era of digitalization of business tax authorities are faced with special challenges in how to prevent huge losses of tax revenues resulting from the abuse of tax benefits provided by tax treaties. The paper deals with different modalities of combating tax treaty abuse – primarily with the principle purpose test (PPT). The investigation into the mechanisms of tax treaty abuse, following the guidelines set out in BEPS Action 6, also covered other relevant articles of the Multilateral Instrument (MLI). The aim of the paper is to indicate that the abuse of the tax treaties represents an obstacle to the sustainable business of companies at the global market. Therefore, tax authorities in Serbia and Bosnia-Herzegovina are required to prepare transparent guidelines on how to interpret their tax treaties recently modified in accordance with MLI provisions.

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