Q. With Respect to OECD’s Base Erosion and Profit Shifting (BEPS) programme, consider the following statements:
1.The OECD’s Base Erosion and Profit Shifting (BEPS) programme aimed to curb the use of low-tax jurisdictions for tax avoidance.
2.Principal Purpose Test (PPT) allows Indian tax authorities to deny treaty benefits if the principal purpose of a transaction or arrangement is to obtain those benefits.
Which of the statements given above is/are correct?
Answer: C
Notes:
Explanation: The OECD’s Base Erosion and Profit Shifting (BEPS) programme aimed to curb the use of low-tax jurisdictions for tax avoidance.
- One of the key BEPS reforms was the Multilateral Instrument (MLI). It allowed countries to amend tax treaties to include provisions like the Principal Purpose Test (PPT) to prevent treaty abuse and treaty shopping.
- Introduction of Principal Purpose Test (PPT), designed to deny treaty benefits. The amendment allows Indian tax authorities to deny treaty benefits if the principal purpose of a transaction or arrangement is to obtain those benefits.
- Assessment beyond Residency Certificates: Amendments empower tax authorities to scrutinize the actual purpose behind transactions, moving beyond mere formal documentation like tax residency certificates.
Source: ForumIAS
