The Absence of Domestic Supplementary Effect of the Principal Purpose Test Rule

Abstract

The principal purpose test rule is a general anti-avoidance/anti-abuse rule provided by income tax treaties which ultimate normative effect is to deny access to treaty benefits. Notwithstanding the incompatibility with its text, the concern is legitimate that the tax administration may exceed the black letter to grant it supplementary effect with respect to the absence of a domestic general anti-avoidance/anti-abuse rule, especially. In this context, both the limiting effect of income tax treaties and the role played by the lei complementar (statute with a higher approval threshold) in the Brazilian tax system must be regarded as additional restrictive elements.