The new diverted profits tax is unlikely to be treaty protected. The BEPS action 7 proposals are likely to substantially widen PE exposure inside and outside the UK. Yet prior to BEPS, the Spanish courts have adopted a substance over form approach to PEs. Two foreign cases have considered whether the collection of information (discussed in the Action 7 proposals) is a core business activity. The new China/Russia treaty is the first to contain a limitation on benefits article modelled on the proposal in the Action 6 report on treaty abuse. Two recent favourable decisions in the Indian courts have held that a foreign taxpayer is protected from Indian tax on indirect gains from an Indian subsidiary. A French decision demonstrates the exception to the general principle that a treaty supersedes domestic law. And finally, good news from Brazil in relation to withholding tax on service fees.
