On Legal Regulation Of International Tax Treaty Abuse

Tax avoidance through international treaty shopping has become a subject of intense topic in the international community. By shrewdly structuring businesses, corporations are currently able to take advantage of tax exemptions contained in tax treaties, though the countries that have joined the treaties never intended for them to benefit from such provisions. Many nations view this practice as tax treaty abuse.The term "treaty shopping" refers to the use of bilateral tax treaties by a resident of a nontreaty country to obtain treaty benefits that would not otherwise be available but for the interposition of an entity (e.g., a corporation) into one of the treaty countries. Treaty shopping emerged out of the inconsistencies among domestic international tax regimes worldwide and the increasing economic interdependence of world trade.As a newly-emerged international tax avoidance, international tax treaty abuse fails to comply with the basic aim of international taxation law and does harm to the source country's benefits from tax, so it is expected to be curbed. Intergovernmental organizations like the Organization for Economic Cooperation and Development (OECD) and the United Nations (U.N.) developed official commentaries on the topic. In addition, many countries, such as the United States, would like to insert anti-treaty-shopping clauses into their model treaty and domestic law or give the general clause for control of the act like Netherlands.As the bigger developing country, China is on the way to open and reform. In order to obtain more foreign capitals, the favorable advantages will be provided in the tax treaty, so it easy for the resident from a third party to make use of it. Due to lack of experience of combating treaty shopping, together with it's complex and secret, it's hard to deal with it.This paper wholly analyzes and deep studies the issue of treaty shopping. Part Ⅰ provides the common practices of treaty shopping and then the legal nature of treaty shopping is presented. Part Ⅱ deals with the importance and necessity of legal curbing this action, demonstrating how treaty shopping can...