{"id":5782,"date":"2025-07-23T14:37:16","date_gmt":"2025-07-23T13:37:16","guid":{"rendered":"https:\/\/well-tax.com\/?p=5782"},"modified":"2025-07-23T14:38:15","modified_gmt":"2025-07-23T13:38:15","slug":"comprension-de-la-compatibilidad-de-las-normas-britanicas-contra-la-elusion-fiscal-con-el-modelo-de-la-ocde","status":"publish","type":"post","link":"https:\/\/well-tax.com\/es\/understanding-uk-anti-tax-avoidance-rules-overview-compatibility-with-the-oecd-model\/","title":{"rendered":"Comprender las normas brit\u00e1nicas contra la elusi\u00f3n fiscal: Visi\u00f3n general y compatibilidad con el modelo de la OCDE"},"content":{"rendered":"\n
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Controlled foreign company (CFC) regimes are now a familiar feature of modern tax systems, and the UK\u2019s anti tax avoidance rules are a representative example. Below we set out (i) why such legislation exists, (ii) how the UK rules work in practice, and (iii) whether, in our view, those rules can co-exist with the principles embedded in the OECD Model Tax Convention on Income and on Capital (\u201cthe OECD Model\u201d).<\/p>\n\n\n\n

1. Why do anti tax avoidance rules exist in the UK?<\/strong><\/h2>\n\n\n\n

1.1 Curtailing base-erosion by deferral<\/strong><\/h3>\n\n\n\n

Historically, a UK parent could allow profits of a low-taxed subsidiary to accumulate offshore and defer UK corporation tax until the profits were repatriated as a dividend. The core rationale of the UK\u2019s anti tax avoidance rules is therefore to prevent such deferral practices \u2014 specifically, to stop UK-resident groups from artificially diverting mobile, mainly passive, income to low-tax jurisdictions.<\/p>\n\n\n\n

1.2 Aligning with BEPS Action 3<\/strong><\/h3>\n\n\n\n

The OECD\u2019s BEPS (Base Erosion and Profit Shifting) Action 3 recommended that member states adopt robust anti tax avoidance rules targeting (i) control, (ii) passive income, and (iii) low effective tax rates. The UK regime implements this framework and thus reinforces international co-operation rather than pursuing unilateral, protectionist measures.<\/p>\n\n\n\n

2. How the UK\u2019s anti tax avoidance rules operate<\/strong><\/h2>\n\n\n\n

2.1 The basic charging mechanism<\/strong><\/h3>\n\n\n\n

Where a non-UK company is at least 25% controlled by UK residents, and the subsidiary\u2019s \u201cchargeable profits\u201d are taxed overseas at less than 75% of the corresponding UK rate, part or all of those profits may be apportioned and taxed on the UK shareholder. The UK corporate shareholder is entitled to a credit for any foreign tax actually paid.<\/p>\n\n\n\n

2.2 Identifying \u201cchargeable profits\u201d<\/strong><\/h3>\n\n\n\n

Only specific categories of income trigger a charge \u2014 broadly:
\u2022 Non-trading finance profits
\u2022 Captive insurance profits
\u2022 Profits arising from \u201cartificial\u201d UK activities
\u2022 UK property finance income<\/p>\n\n\n\n

Exemptions \u2014 including the \u201clow profits, low profit margin\u201d and \u201cexcluded territories\u201d tests \u2014 are designed to filter out ordinary commercial operations.<\/p>\n\n\n\n

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2.3 Interaction with the UK\u2019s dividend exemption<\/strong><\/h3>\n\n\n\n

Because most foreign-source dividends are already exempt in the UK, the anti tax avoidance regime is targeted \u2014 it does not apply automatically to all unrepatriated earnings, only to those bearing signs of tax avoidance. As a result, genuine, fully-taxed business profits typically fall outside the scope.<\/p>\n\n\n\n

2.4 Anti-double-tax mechanisms<\/strong><\/h3>\n\n\n\n

In line with BEPS Action 3 guidance, the UK\u2019s anti tax avoidance rules include:
\u2022 A credit for underlying foreign tax
\u2022 Exemptions where profits will be taxed on repatriation
\u2022 Relief for previously taxed income on disposal of the subsidiary<\/p>\n\n\n\n

These mechanisms minimise the risk of economic double taxation \u2014 a key test of compatibility under the OECD Model (see Part 3 below).<\/p>\n\n\n\n

3. Compatibility of UK anti tax avoidance rules with the OECD Model<\/strong><\/h2>\n\n\n\n

3.1 Source vs. residence taxation<\/strong><\/h3>\n\n\n\n

Article 7 of the OECD Model assigns taxing rights over business profits to the state of the permanent establishment. However, the UK\u2019s anti tax avoidance rules do not tax the foreign company \u2014 they tax the UK resident shareholder on an attributed share. As such, there is no breach of Article 7, since the UK is exercising its right to tax residents\u2019 worldwide income (Article 1).<\/p>\n\n\n\n

3.2 Avoiding treaty override<\/strong><\/h3>\n\n\n\n

OECD Commentary (Art. 1, para 81) expressly acknowledges that states may adopt anti tax avoidance measures \u2014 including CFC-style rules \u2014 to protect their tax base, provided foreign tax relief is available. The UK complies by offering credits for underlying tax and excluding high-taxed subsidiaries entirely.<\/p>\n\n\n\t\t

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