Courts Worldwide Diverge in Applying the Principal Purpose Test

The OECD’s Principal Purpose Test (PPT) has gained extensive adoption, with over 100 countries signing the Multilateral Instrument (MLI) and about 1,950 bilateral tax treaties being covered by the MLI. Despite this broad endorsement, there remains a conspicuous absence of precedents to inform its application. This article examines the intricate landscape of the PPT, tracing its development from the Base Erosion and Profit Shifting (BEPS) initiative to its diverse applications in judicial contexts worldwide.

Part 1 of this series analyzes the landmark decisions in the Canadian Alta Energy Luxembourg case, and the Argentinian Molinos case. Part 2 will review the ...