Eivind Furuseth (Independent) and Jinyan Li (Osgoode), Improper Use of Tax Treaties and Source Taxation: Policy, Practice and Beyond, Osgoode Legal Studies Research Paper (Oct. 20, 2025)

The question of improper use of tax treaties (or treaty shopping) defies a simple or straightforward answer. The line between “proper use” and “improper use” a tax treaty depends on the determination of the intended use of a treaty provision by Contracting States (i.e. the common intention as well as the object and purpose of the treaty provision). As a treaty interpretation issue, that determination varies from country to country. Furthermore, the extent of taxpayers’ right to tax planning and expectation of tax certainty also varies across countries. Finally, the effect of domestic general-anti-avoidance rules (GAARs) and the new principal purpose test (PPT) in treaty shopping cases remains unclear. Drawing on 43 reports from IFA branches and the European Union, landmark court decisions and scholarly debates, this paper provides a comprehensive overview of how source states deal with treaty shopping and offers some predictions about the impact of the PPT as a “global minimum standard” in addressing treaty shopping.