Tax Treaties in Practice: Anti-Avoidance, BEPS, Dispute Resolution and Investment Protection

Mr Justin Jerzy Tan conducting Session 4 of the Masterclass.

Tax treaties are often introduced as instruments for allocating taxing rights and relieving double taxation. In practice, however, applying a treaty can require a much broader analysis. Questions of beneficial ownership, treaty abuse, domestic anti-avoidance rules, multilateral treaty modifications and dispute resolution can all affect whether a taxpayer is entitled to a treaty benefit. In some circumstances, the analysis may extend beyond the tax treaty itself to the investment protections contained in a bilateral investment treaty.

These issues formed the focus of Session 4: (PM) Treaties – Foundations, held on 1 September 2026 as part of the Masterclass with Professor David Rosenbloom and Professor Dr René Matteotti ↗ (opens in new tab) at the Tax Academy of Singapore. The session was led by Mr Justin Jerzy Tan, Senior Lecturer and Vice-Dean (Student Affairs) at the NUS Faculty of Law, and covered general treaty provisions and anti-avoidance rules, BEPS implementation and the Multilateral Instrument (MLI), as well as bilateral investment treaties.

The discussion highlighted a central feature of contemporary treaty analysis: the treaty text remains the starting point, but understanding the outcome often requires consideration of the surrounding legal framework and the precise facts of the arrangement.

Treaty benefits depend on more than the form of an arrangement

A significant part of the session examined the concept of beneficial ownership, particularly in relation to dividends, interest and royalties.

The discussion considered cases in which an entity receives income from one jurisdiction and subsequently makes payments to another entity. Such arrangements raise an important question: is the recipient genuinely entitled to use and control the income, or is it merely an intermediary through which the income passes?

The session examined the practical indicators that courts have considered when determining beneficial ownership, including possession, use, control and risk. One example discussed was the Canadian Velcro case, where the analysis focused on whether the recipient had sufficient dominion over royalty income rather than being merely a conduit. The discussion also considered the more recent Husky Energy litigation concerning dividends paid to Luxembourg entities following securities-lending arrangements.

In Husky Energy Inc. v The King, the Canadian Federal Court of Appeal upheld the conclusion that the Luxembourg entities were not the beneficial owners of the dividends for purposes of the Canada–Luxembourg treaty. The court noted, among other matters, that the entities were subject to obligations to make corresponding dividend compensation payments and did not assume the relevant economic risk and control over the dividends. (See: Canada's Federal Court of Appeal: Husky Energy decision ↗ (opens in new tab))

The significance of these cases extends beyond any particular structure. They illustrate why treaty analysis cannot necessarily stop at the legal form of an arrangement. The contractual rights, movement of funds, economic exposure and actual control exercised by the recipient may all become relevant.

At the same time, the session emphasised that satisfying a beneficial ownership analysis does not necessarily resolve the treaty question. A taxpayer may still need to consider applicable anti-avoidance provisions.

Anti-avoidance rules add another layer to treaty analysis

The session then examined the interaction between treaty anti-avoidance provisions and domestic general anti-avoidance rules.

At the treaty level, the Principal Purpose Test (PPT) is a key component of the international framework for preventing treaty abuse. The OECD explains that the PPT is intended to deny a treaty benefit where, having regard to all relevant facts and circumstances, obtaining that benefit was one of the principal purposes of an arrangement or transaction, unless granting the benefit would be in accordance with the object and purpose of the relevant treaty provisions. The PPT forms part of the BEPS Action 6 minimum standard on preventing treaty abuse. (See: OECD: Preventing Tax Treaty Abuse ↗ (opens in new tab))

The session explored an important practical question: what exactly constitutes a treaty benefit?

The discussion considered the need for a benchmark against which the existence of a treaty benefit can be assessed. The OECD's commentary on the PPT provides guidance on identifying the relevant benefit and considering the overall tax consequences of an arrangement.

This matters because a lower tax liability in one jurisdiction does not necessarily tell the entire story. Depending on the circumstances, tax paid in another jurisdiction, including the availability of foreign tax credits, may affect the overall tax position.

The session illustrated this through the UK-Ireland Burlington Loan Management litigation. The case concerned an Irish-resident company that acquired a debt claim carrying UK-source interest and sought the benefit of the UK-Ireland treaty's treatment of interest. Article 12(5) of that treaty denied the benefit where one of the main purposes of a person concerned with the creation or assignment of the debt claim was to take advantage of the relevant treaty provision.

Importantly, the most recent decision in Burlington is the 2026 England and Wales Court of Appeal decision, [2026] EWCA Civ 461. The Court of Appeal upheld the decisions below and dismissed HMRC's appeal. It held, among other things, that the mere fact that a treaty-resident taxpayer acquired a debt claim in the expectation of receiving a treaty benefit expressly available to a person in its position did not, without more, amount to abuse of the treaty.

This is a useful illustration of why treaty anti-avoidance analysis should not be reduced to a simple question of whether tax has been saved. The purpose of the treaty provision and the circumstances in which the benefit is obtained also matter.

Singapore's domestic anti-avoidance rules operate alongside treaty analysis

The session also considered Singapore's domestic general anti-avoidance framework under section 33 of the Income Tax Act 1947.

IRAS explains that section 33 is Singapore's general anti-avoidance provision and that its application is informed by the Court of Appeal's decision in Comptroller of Income Tax v AQQ. The statutory framework includes an analysis of whether an arrangement has the effect of altering the amount of income tax payable and whether the relevant statutory requirements and exceptions are satisfied.

The important point for treaty analysis is that domestic anti-avoidance and treaty anti-abuse provisions are related but are not simply interchangeable. The applicable provision depends on the treaty, the domestic legislation and the particular facts of the case.

The session therefore considered the possibility that a taxpayer may need to navigate both the treaty framework and Singapore's domestic anti-avoidance rules when assessing whether a particular structure can legitimately obtain a treaty benefit.

For Singapore, this sits within a broader international tax framework. MOF states that Singapore's international tax policies are implemented through domestic law, DTAs and other international tax cooperation agreements, with the objective of supporting international trade and investment while aligning with international standards. (See: Singapore Ministry of Finance: International Tax ↗ (opens in new tab))

The MLI means that the bilateral treaty text may not tell the whole story

Another major theme of the session was the impact of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, commonly known as the BEPS MLI.

The MLI provides jurisdictions with a mechanism to modify existing bilateral tax treaties so that treaty-related BEPS measures can be implemented without renegotiating every treaty individually. Singapore signed the MLI on 7 June 2017, ratified it on 21 December 2018 and brought it into force on 1 April 2019. MOF describes the MLI as a mechanism that allows jurisdictions to amend their DTAs to implement internationally agreed BEPS standards, including measures addressing treaty abuse and dispute resolution.

Singapore's treaty network illustrates why this matters in practice. IRAS states that Singapore has DTAs, limited DTAs and exchange-of-information arrangements with around 100 jurisdictions. IRAS also provides filters identifying agreements that have been modified by the MLI and those containing mandatory binding arbitration provisions.

The practical consequence is that treaty analysis may require more than reading the original bilateral agreement. Practitioners may need to establish whether the relevant DTA has been modified by the MLI, which MLI provisions apply to both treaty partners and when those modifications take effect.

The session also discussed the MLI's effect on treaty preambles and the inclusion of language making clear that the contracting jurisdictions intend to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including through treaty-shopping arrangements.

Dispute resolution is part of the treaty architecture

Treaty analysis does not end when the taxpayer and tax authority disagree.

The session considered the role of Mutual Agreement Procedures (MAP) and mandatory binding arbitration in resolving cross-border tax disputes.

IRAS describes MAP as a dispute-resolution facility available under the MAP article in Singapore's DTAs. It allows Singapore's competent authority and the competent authority of the treaty partner to address cases where taxation is not in accordance with the relevant DTA. (See: IRAS: Mutual Agreement Procedure and Arbitration ↗ (opens in new tab))

Some Singapore DTAs also contain mandatory binding arbitration provisions. Where the relevant conditions are met and the competent authorities have been unable to resolve the case within the specified period, a taxpayer may request that the unresolved issues be submitted to an arbitration panel. IRAS notes that the applicable time period and procedural requirements depend on the relevant treaty.

The session examined how arbitration interacts with domestic proceedings and why the relationship between different dispute-resolution mechanisms matters. It also discussed Singapore's adoption of a final-offer, or “baseball”, arbitration process under the relevant MLI framework, under which the arbitration panel selects between the positions put forward by the competent authorities.

The broader lesson is that dispute resolution is not simply an afterthought to treaty interpretation. The procedural provisions of the treaty can affect how a cross-border tax dispute proceeds, particularly where domestic litigation, MAP and arbitration may intersect.

Bilateral investment treaties can introduce another layer of analysis

The final major part of the session turned to bilateral investment treaties (BITs).

A BIT is distinct from a DTA. Whereas a DTA primarily allocates taxing rights and addresses double taxation, a BIT generally establishes protections for qualifying foreign investors and investments in the host state. Depending on the treaty, these protections may include national treatment, most-favoured-nation treatment, fair and equitable treatment, protection against expropriation and provisions concerning the transfer of funds.

The relevance to taxation depends critically on the wording of the particular investment treaty.

As the session emphasised, some BITs contain broad tax exclusions, while others contain more limited tax carve-outs or exceptions. The question is therefore not simply whether a dispute involves taxation, but whether the particular tax measure falls within the scope of the investment treaty and whether the treaty permits the relevant claim.

The session examined this through examples involving India, Korea and Ecuador. The India-related discussions considered retrospective taxation and the interaction between domestic tax law and investment treaty protections. The Singapore Court of Appeal's judgment in Vedanta Resources plc v Republic of India confirms that the related Vedanta and Cairn arbitrations arose from Indian tax assessment orders and were brought under the India–UK BIT.

The session also discussed Lone Star v Korea, where the investment dispute involved actions by Korean tax and financial regulatory authorities in connection with Lone Star's investment in Korea Exchange Bank. The arbitration materials confirm that the dispute involved the Korea–Belgium-Luxembourg Economic Union investment treaties and issues concerning Korea's tax and financial regulatory measures.

The discussion of these cases reinforced a central point: the wording of the relevant investment treaty matters enormously. A tax measure may be excluded altogether, excluded subject to exceptions, or potentially remain within the scope of particular investment protections.

This makes it important to distinguish an ordinary tax dispute from an investment treaty claim. A disagreement over the amount of tax payable does not automatically become an investment treaty dispute. The claimant must establish a basis for the alleged breach under the applicable investment treaty.

Treaty analysis is increasingly a question of interaction

Taken together, the discussion in Session 4 demonstrated how several layers of international tax law can interact.

A taxpayer considering a cross-border structure may need to ask whether the recipient is entitled to the relevant treaty benefit, whether the arrangement satisfies applicable beneficial ownership requirements, whether a treaty anti-abuse rule such as the PPT applies, whether domestic anti-avoidance rules are relevant, whether the DTA has been modified by the MLI, and what dispute-resolution mechanisms are available if the tax treatment is challenged.

Where a foreign investment is involved, the analysis may extend further to the relevant BIT or investment chapter of a broader economic agreement.

This complexity reflects the wider role of treaties in Singapore's international tax environment. MOF notes that Singapore's DTAs provide certainty over taxing rights, help eliminate double taxation, promote bilateral investment and trade flows, and provide a platform for resolving tax disputes.

For tax professionals, the practical implication is clear: treaty analysis requires both technical precision and an appreciation of how different legal instruments interact.

Looking beyond the treaty article

The foundations of tax treaty law may begin with familiar questions about residence, source and the allocation of taxing rights. But the discussion in Session 4 showed that the more difficult questions often arise at the boundaries between different parts of the international tax framework.

Beneficial ownership can determine whether treaty relief is available. Anti-avoidance provisions can limit treaty benefits even where the formal requirements appear to be satisfied. The MLI can modify the operation of existing bilateral treaties. MAP and arbitration can determine how disputes are resolved. And, where foreign investment is involved, investment treaties can create a separate layer of protection whose application depends on their precise terms.

The result is an international tax environment in which the treaty text remains fundamental, but the surrounding legal architecture matters just as much.

For practitioners, policymakers, businesses and tax administrators, understanding these interactions can support more careful treaty interpretation, better-informed cross-border decision-making and more effective management of international tax disputes.

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