International case law

Abstract

Chapter continues the journey through the tax jurisprudence on the concept of BO, taking a deep dive into selected case law. It supplements the previous chapter by trying to determine what role in the quest for the meaning of BO is played by law-in-action through judicial decisions in landmark cases when courts interpret and apply the concept of BO to resolve disputes between the tax authorities and taxpayers. The analysis of the entire selected case law in chapter five embraces a wide time horizon of 50 years and wide geography, covering common law countries (the United States, Canada and the United Kingdom) as well as civil law states (France, the Netherlands and Switzerland). The analysis of tax jurisprudence is carried out chronologically in order to follow the evolution of the understanding of the concept of BO over time in international case law. Wherever possible and appropriate, in addition to the analysis of each judgment in a specific case, the impact of the judgment on subsequent tax jurisprudence and legislation is depicted. The primary focus of this chapter (i.e., manifesting itself via a in-depth and comprehensive analysis of selected judgments) is on the following tax jurisprudence: 1) The judgment of the United States Tax Court (USTC) of 5 August 1971 in the Aiken Industries case; 2) The judgment of the Dutch Supreme Court (Hoge Raad der Nederlanden) of 6 April 1994 in the Royal Dutch Shell case; 3) The judgment of the Court of Appeal in London of 2 March 2006 in Indofood International Finance Ltd. v. JP Morgan Chase Bank NA case; 4) The judgment of the Council of State in France (Conseil d’État) of 29 December 2006 in Société Bank of Scotland case; 5) The judgment of the Federal Court of Appeal (FCA) in Canada FCA of 26 February 2009 in Canada v. Prévost Car Inc. case; 6) The judgment of the Federal Supreme Court of Switzerland (Tribunal fédéral) of 5 May 2015 in the Federal Tax Administration v Danish A/S case (commonly referred to as the Swiss Swap case). The deep dive into selected seminal judgments on the concept of BO internationally confirms the conclusions from the previous chapter that mapped general themes in tax jurisprudence concerning that concept, i.e., the judicial approaches to the concept of BO vary a lot, revealing the extreme malleability of the concept of BO. At one end of the spectrum, we have the tax jurisprudence of the US, the Dutch and the Canadian courts, which relatively rigorously apply the canons of interpretation relevant to the concept of BO and quite faithfully follow the OECD's guidance with the aim of decoding the international fiscal meaning of that concept. This tax jurisprudence exemplifies the effective judicial transplants of the concept of BO from the OECD's materials to the ground of tax treaties from the perspective of source countries (SCs). At the other end, we spot the British, French and Swiss tax jurisprudence, which appear to treat the canons of interpretation relevant to the concept of BO loosely and to use the OECD materials as a pretext to create domestic-biased meanings of the international concept of BO. They represent hybrid judicial transplants of the concept of BO. In principle, this case law seems to lend a lot of weight to facts and circumstances that imply the abuse of tax treaties. To some extent, this importance was given by the US courts, but whenever that appears to be the case, they apply the antiabusive judicial doctrines (e.g. step transaction doctrine) rather than the concept of BO. The UK and the French courts, in turn, in such cases simply dress up the concept of BO into a kind of GAAR or a domestic antiabusive judicial doctrine. A similar approach can be detected in the tax jurisprudence on the concept of BO in Indonesia, Spain, Denmark and Sweden.