Limitation On Benefits Clauses In Tax Treaties

The tax treaty is an economic area treaty,which aims to promote transactions between countries.If there is no tax treaty signed between countries,the goods,services,funds and talents of many countries will not be able to freely interact with each other due to strict tax restrictions.Its purpose is the avoidance of double taxation,and is intended to avoid creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.Some non-states company make some arrangements deliberately to gain the benefit of tax treaty.This give rise to the problem of base erosion and weakening tax sovereignty.According to the OECD report,due to BEPS the global corporate income tax has lost about $100 billion to$240 billion per year,and treaty shopping is the most important form of treaty abuse.The loss of global corporate income tax is very large.So the BEPS comes into being,it issued the sixth action plan,which is one of 15 action plans,its main content is Preventing the Treaty Benefits Granted Under Inappropriate Circumstances.Limitation on Benefits clauses in it is an important rule to solve the problem and is suggested to be included in the OECD tax convention.At present,the LOB clauses in the existing tax treaties in various countries and Action 6 of BEPS are basically used in the model of the US tax convention,and in 2016,the United States,as the maker of the LOB clauses,revised its model tax convention and set a more stringent LOB clauses.OECD released Draft Contents of the 2017 Update to the OEDC Model Tax Convention,adding an article concerning LOB clauses.The in-depth study of LOBclauses can not only provide preference for the development of the anti-treaty shopping tax in the world but also for the related work in our country.Now,only 5 of the more than 100 tax treaties signed by China include independent LOB clauses,which are not comprehensive and rough.At the present time,there is no laws to forestall treaty abuse in domestic,only some simple anti-tax avoidance clauses were stipulated in some laws.With the implementation of the "The Belt and Road" strategy,as well as a large number of enterprises "going out,bringing in",the problem of treaty shopping by the multinational corporations has an increasing impact on our income tax revenue.Based on these circumstances,and as a rapidly developing country actively integrated into the global economic tide,I wish China can learn from advanced international anti-avoidance experience and learn about the latest international anti-avoidance rules,In the future,China should use LOB clauses in tax treaties,and further improve domestic corresponding laws.At the same time,model tax convention with Chinese characteristics can be formulated.Specifically,first this article will introduce the historical origin and development of LOB clauses,analyze its connotation,and introduce its basic content,and finally analyze the significance of the clauses.Second,this article will analyze the application of LOB clauses in developing and developed countries,and analyze the differences and deficiencies in their application.Third,this article will describe the newest developments of LOB clauses,this series of developments solve the problems existing in the early LOB clauses.This article also makes in-depth discussions on how to better use the LOB clauses in the future.Finally,this article will analyze five bilateral tax treaties with LOB clauses signed with China,pointed out their shortcomings and introduced the development process of China's LOB clauses,and hope that China could learn from advanced international anti-avoidance experience and put forward concrete suggestions on how to fully apply LOB clauses to better cope with tax avoidance issues.