Double non-taxation and the use of hybrid entities

Resumo

The thesis analyzes the interaction between double non-taxation and the use of hybrid entities within the international context, including also the application of tax treaties. In this regard, and contrary to the majority opinion within the international tax law doctrine, the author argues that double non-taxation should remain within its nature of a simple outcome, which, absent of any subjective interpretations, should neither be regarded per se as a cause of international concern nor be used as an immediate proxy in the design of anti-hybrid rules. Likewise, and against the international trend of matching tax outcomes, the author criticizes the OECD proposal on this matter (i.e. linking rules). On one hand, the author argues that these rules posses a very complex structure, being also highly complex to administer. On the other hand, the author stresses that these rules do not really target the core issue with respect to hybrids and reverse hybrid entities, i.e. the different tax characterization of entities, which remains even after the application of these rules. The critical view of the author leads to a specific alternative proposal denominated "reactive coordination rule". The proposal is simple and attempts to coordinate the characterization of entities as per the one given in the "home country", being based on three fundamentals tax policy aims: simplicity, coherence and administrability. This proposal appears as a unique and irreverent voice as regards to the traditional manners to approach the issues under analysis, where the use of concepts given by granted seems to be the starting point of the debate. The thesis is divided in three parts and six chapters, excluding the introduction and conclusions. Part One, which includes Chapter I and II, analyzes the international notion of double non-taxation, including its debate within tax treaties. Part Two, which includes Chapters III and IV, studies the concept of hybrid entities, including also its effects as regards to the benefits of tax treaties, especially referred to allocation of income’s conflicts. Part III, which includes Chapter V and VI, provides a critical view on the concept of hybrid mismatch arrangements and the OECD proposal to counteract them, i.e. linking rules. This part of the work also provides a substitute alternative proposed by the author: a domestic reactive coordination rule.