Some may be under the impression that substance is a widely
known tax concept and that there is not much to say.
From a tax point of view, however, substance remains a changing
concept, evolving with tax laws, jurisprudence and doctrine. Since
the Organisation for Economic Co-operation and Development (OECD)
presented their action plan on base erosion and profit shifting
(BEPS), the concept of substance has reached another level with the
principal purpose test (PPT) introduced in Action 6.
The PPT is an anti-treaty abuse clause that "allow[s]
contracting states to deny the application of treaty provisions
when transactions or arrangements (such as the setting up of a SPV
in Luxembourg) are entered into in order to obtain the benefits of
these provisions in inappropriate circumstances." Private
equity, real estate, and hedge/debt funds (so called
"AIFs") are quite worried about the potential
consequences of a broad interpretation of the PPT concept, which
may
