Publication: Tax sparing clauses as a policy instrument of developing countries. Evidence from the Latin-American tax treaty network
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2021-04-08
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Umeå University
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Abstract
Developing countries frequently grant corporate income tax incentives in order to attract foreign direct investment. To secure the effectiveness of these measures at a cross-border level, tax sparing clauses secure a notional credit at residence, meaning a discount on the taxes due even if no or lower taxes were paid at source. These clauses prevent the home country of the investor from taxing that income, allowing the investor to retain the tax spared by the host country. This contribution examines the rationale of tax sparing and conducts an examination of the issue from the perspective of the Latin-American tax treaty network -comprising more than 250 treaties- to draw relevant conclusions from the analysis of the specific clauses included in these agreements.
Description
Special Issue: International Tax Challenges for Developing Countries
Keywords
Tax treaties, Developing countries, Tax sparing, Latin-America, Globe
Bibliographic citation
Navarro Ibarrola, A. (2021). Tax sparing clauses as a policy instrument of developing countries. Evidence from the Latin-American tax treaty network. Nordic Journal on Law and Society, 4(1), 1-37.