General Anti-Abuse Rule (GAAR) — ATAD

The General Anti-Abuse Rule (GAAR) under Article 6 of ATAD requires all EU member states to introduce a general anti-abuse provision into their national corporate tax law. The GAAR functions as a catch-all mechanism against tax arrangements that are formally legal but lack economic substance and are primarily aimed at obtaining a tax advantage. It complements the specific anti-abuse rules of ATAD (interest limitation, CFC, hybrids, exit taxation).

• Catch-all provision: applies when no specific anti-abuse rule is applicable
• Three-element test under Art. 6(1) ATAD (cumulative): (1) the main purpose or one of the main purposes of the arrangement is to obtain a tax advantage; (2) the tax advantage defeats the object or purpose of the applicable tax law; (3) the arrangement is not genuine (lacks economic substance)
• Tax consequence: treatment as if the abusive arrangement had not been made
• Basis in EU law: aligned with CJEU case law on the general principle of abuse of law
• Member states may retain stricter national GAAR rules

The GAAR was adopted as part of ATAD in July 2016, codifying key principles from longstanding CJEU case law on the prohibition of abuse of law (notably Emsland-Stärke C-110/99, Cadbury Schweppes C-196/04, Kofoed C-321/05). The Halifax ruling (C-255/02), although a VAT case, shaped the general EU law concept of abuse that underpins the ATAD GAAR. Many EU member states already had national GAAR rules, but ATAD created for the first time a Union-wide minimum standard for the corporate tax field.

Transposition into national law varied: Germany largely relied on the existing §42 AO (abuse of legal arrangements) and supplemented it where necessary. France transposed the ATAD GAAR by adapting the existing Art. L64 of the Livre des procédures fiscales (supplemented by Art. L64 A). The Netherlands relied on the “fraus legis” principle in existing case law. The GAAR is thematically related to BEPS Action 6 (Principal Purpose Test in tax treaties), though the latter concerns treaty abuse rather than domestic GAARs.

The ATAD GAAR applies to all corporate taxpayers in the EU. It applies where the following three conditions under Art. 6(1) ATAD are met cumulatively:

• The main purpose or one of the main purposes of the arrangement is to obtain a tax advantage
• The tax advantage obtained defeats the object or purpose of the applicable tax law
• The arrangement or series of arrangements is not genuine (lacks economic substance)

Genuine arrangements with economic substance do not fall under the GAAR, even if they result in tax savings. The GAAR is subsidiary to specific anti-abuse rules.

• Identification of a non-genuine arrangement (no economic substance)
• Main purpose or one of the main purposes: obtaining a tax advantage
• Tax advantage defeats the purpose and intent of the applicable tax law
• Legal consequence: tax neutralisation of the abusive arrangement
• Burden of proof is governed by national law; Art. 6 ATAD does not contain an explicit burden of proof provision
• Consistent application with specific ATAD anti-abuse rules and national tax law

5 corrections:
- The summary_en contains the same inaccurate 'two-step test' as summary_de.
- The key_requirements_en contains the same inaccurate burden of proof claim as the DE version.
- The key_requirements_de claims a specific burden of proof allocation.
- The 'two-step test' described in summary_de is inaccurate.
- last_amended shows '2016-07-12' (adoption date).
7 clarifications.
4 notes.