General

Antiavoidance Rules in LATAM and cause of contract 1

General Anti avoidance Rules in Latin America and the cause of

contract1
Published:
Revista
ADVOCATUS Nro. 31, 2015-I
A. Marco Chvez Gonzales

Universidad de Lima, Per.
LLM Boston University


Pags. 375 a 398.
TP Diplome Leiden University

LLB Pontificia Universidad Catolica del Per, BS Accounting Universidad
Ricardo Palma
Professor of ESAN and Universidad Mayor de San Marcos

I. Introduction. II. Critical Analysis: 1. General Anti avoidance rules. 1.1
Tax planning, tax avoidance, simulation and tax evasion. 1.2 The abuse
of law in Europe. 2. Business purpose test and substance over form. 2.1
. Business purpose test. 2.2 . Substance over form. 3. Reception of the
General Anti avoidance rules in Latin America. 3.A. Countries that have
incorporated substance over form and business purpose. 3.B. Countries
that have incorporated substance over form. 3.C. Latin American
countries does not have General Anti avoidance rules. 4. Elements of
the General Anti avoidance rules: 4.1 . Act "inappropriate", "improper,
"atypical", or "artificial. 4.2 . Tax advantage. 4.3 . Procedure for the
application of the General Anti avoidance rules. 5. The abstract cause of
the contract as economic-social function. 6. The specific cause of the
contract and contractual-type. 6.1 The purpose or reason in the specific
cause of contract. 7. Application of the procedure of the General Anti
avoidance rules. III. Conclusions.
I. Introduction
General anti-avoidance rules (GAARs) allow tax authorities characterize
national and international "anomalous"2 transactions that erode the tax base
of the country source, an investigation of the GAARs in Latin America is
necessary in order to know if these rules incorporated the doctrine substance
over form (primacy of reality vs legal forms and juridical structures), or the
doctrine of the business purpose (motive of business) which is connected with
the cause of the contracts; and if other countries that not have such rules
apply the Principle Abuse of Law to combat tax avoidance.
We also wish to examine whether cause of contract3 as an abstract social
economic function or cause of contract as concrete economic function allows
a better investigation of the chosen legal forms by the taxpayers in order to

1

Cause of contract is used in Civil Law the reason why a party entered into a contract, while Consideration is used
in Common Law.
The "anomalous" term we will use to refer to the concepts: artful, inadequate, improper, atypical.
3
Latam countries adhere to abstract cause of contracts which means that economic function of the contract is
2
typified
The "anomalous"
in the civil law.
term we will use to refer to the concepts: artful, inadequate, improper, atypical.
3
Latam countries adhere to abstract cause of contracts which means that economic function of the contract is
typified in the civil law.
2

2 Angel Marco Chavez Gonzales

determine whether they are "abnormal" and they have no other purpose than
to reduce their tax burden.
Possibly our ideas are not shared by all as the opposite may occur.
I. Critical Analysis:
1. General anti-avoidance rules.
They are domestic rules that allow tax authorities to recharacterize a
transaction or series of transactions that have been entered by contracting
parties with the sole or main purpose of obtaining undue tax benefits4.
General anti-avoidance rules are legislative provisions which have in common
an avoidance fact formulated in general terms, which may include any
transaction assed by the tax authority5, either disregarding the transaction
performed with sole purpose to avoid taxes or applying the regulation which
has been avoided6 to obtain undue tax benefits and counteract any avoidance
behavior without having to wait for a specific law each time a new conduct of
this type is detected7.
General anti-avoidance rules are based on fiscal justice which on the one
hand restrict economic freedom to celebrate transactions and contracts to not
abuse of his right to minimize his tax burden8, reduce or defer a tax by
abnormal means: abuse of the law/right, abuse of transactions and legal
forms in a manner that conflicts with the cause of the contract, without directly
violating the rule but the values or principles of the tax system"9; on the other
hand, limit the legal certainty and confidence in transactions before the fiscal
and judicial authority.
Due to the difficulty of proving the subjective element (intent to avoid) the
objective conditions that arise from an analysis of the facts and the
examination of the legal forms10 often in themselves prove the existence of
such an intention to avoid the tax law11, the burden of proof corresponds to
the tax authority12.

RUSSO, Raffaele. Fundamentals of International Tax Planning. Amsterdam:IBFD, 2007, p. 207.

GARCIA NOVOA, Cesar. Naturaleza y funcin jurdica de la Norma VIII del Titulo Preliminar del Cdigo Tributario
Peruano. En: Revista del Instituto Peruano de Derecho Tributario Nro. 44. Lima: IPDT, Abrl 2006, p. 80.
6
Idem, p. 86.
7
SOLER ROCH, Maria Teresa. Las clusulas antiabuso especficas y los convenios de doble imposicin. Espaa,
Relatora General.En: Memorias de las XVII Jornadas Latinoamericanas de Derecho Tributario - Tomo II. Lima:
IPDT, 2014, p. 35.
8
RUSSO, Raffaele. Ob. Cit, p. 52.
9
Primera Conclusin de la Resolucin Tema 1: La elusin fiscal y los medios para evitarla. En: XXIV Jornadas
Latinoamericanas de Derecho Tributario. Isla Margarita, Venezuela, 2008.En:
http://www.iladt.org/FrontEnd/ResolutionDetailPage.aspx
10
RUIZ ALMENDRAL, Violeta. El fraude a la ley tributaria a Examen. Los problemas de la aplicacin prctica de la
norma general antifraude del articulo 15 de la Ley General Tributaria a los mbitos nacional y comunitario. Navarra:
Ed. Arazandi, p. 113.
11
CAHN-SPEYER W. Paul. La potestad de la administracin para calificar los hechos de acuerdo con su
naturaleza econmica. En Revista Intituto Peruano de Derecho Tributario Nro. 44. Lima: IPDT, abril 2006. p. 37.
12
SOLER ROCH, Maria Teresa. Las clusulas antiabuso especficas y los convenios de doble imposicin. Ob. Cit,
p. 35.
5

General Antiavoidance Rules in LATAM and cause of contract 3

The General anti-avoidance provisions are anti-abuse rules 13 to face
taxpayers' behaviors do not infringe formally the law but they break the
purpose of the law by means of the manipulation of legal forms or
transactions that come into conflict with the cause of the contract.
1.1 Tax planning, tax avoidance, simulation and tax evasion
Tax planning prevents or minimizes the burden tax through use of legal forms
that produces an economic result that the tax legislator did not attempt to tax.
There is not conflict between the transaction and the purpose of the tax law14.
Choose the legal alternative that provides tax savings not be delegitimized,
because it is not hiding or altering an economic reality nor it is contrary to law,
it is embracing their civil and commercial effects renounced the effects of
another transaction, for example: a company that decides to acquire property
by means of financial leasing to obtain an accelerated depreciation renounces
the effects of a purchase contract.
Tax Avoidance is to obtain an economic outcome free or reduced tax thru
loopholes and ambiguities of the tax law abusing its purpose but respecting
the words of the law, for example: the taxpayer use contracts which business
purpose break the cause of the contract15 because they embrace the effects
of other type of contract.
For example, VAT law exempt corporate reorganization, a company that
wishes to sale its unique asset decides to circumvent VAT making to be
absorbed by the acquirer avoiding payment of VAT, some months after the
absorbing company sells the asset to a third party, i.e. corporate
reorganization had consequences of a contract of sale since its business
purpose did not correspond to a business reorganization
abusing the
purpose of the law to obtain tax advantage.
Simulation is an appearance of reality which conceals the factual transaction
(partial simulation) or a transaction that does not exist at all (absolute
simulation) 16 , the first serves as instrument of circumvention because the
transaction breaks its contractual cause to obtain the economic result of the
disguised transaction, for example: a company hires a worker as selfemployed but he works as dependent, or two companies conclude a
consortium agreement however it operates as a joint venture; the second
(absolute simulation) is instrument of tax evasion by being a sham transaction
that does not conceal any reality violating directly the rule, e.g. false invoices.

13

TARSITANO, Alberto. La clusula antiabuso en el derecho tributario argentino. El fin de la elusin?. En: Revista
Derecho Fiscal Nro.1, marzo/abril 2007, Buenos Aires, Lexis Nexis, p.33.
14
Idem, p.28 y 29.
15
Idem.
16
GARCIA NOVOA, Csar. La elusin fiscal y los medios para evitarla. En: XXIV Jornadas Latinoamericanas de
Derecho Tributario, ILADT, Isla Margarita, Venezuela, 2007, p. 30.

4 Angel Marco Chavez Gonzales

Tax evasion, is an illegal practice, taxpayers performs intentionally
transactions to hide their taxes17 or sham facts to obtain a tax benefit e.g.:
sham purchase to obtain VAT refunds.
1.2. Abuse of law in Europe
The European Court of Justice regarding the abuse of law on the issue of
VAT, has established criteria through its jurisprudence.
International jurisprudence of the European Court of Justice (Halifax and
Weald Leasing), the concept of 'abusive practice' requires the concurrence of
two requirements: a) carrying out operations that notwithstanding the formal
application of the VAT Directive, have as a result the obtaining of a tax
advantage which would be contrary to the purpose of the Directive, and b) it
must be apparent from a number of objective factors , the artificial nature of
the transactions, the essential purpose of these transactions is to obtain a tax
advantage18.
It follows, that the abusive practice not only exist because of artificiality of the
transaction, but it is required tax benefit obtained is also contrary to the
purpose of the law. In other words, if the result of a transaction or transactions
are artificial, but not contrary to the purpose of the law an abusive practice
not exist.
Furthermore in Weald Leasing case (which is posterior to the Halifax
statement), the European Court of Justice held there is existence of abusive
practice between two companies (CML and CARC) of the same group
(Churchill Group), that provide insurance service exempt from VAT (for which
recovered approximately 1% of VAT) they adopt a structure through which,
when these companies need a new computer, this is acquired by a third
company of the Group Churchill (Weald Leasing Ltd in charge of purchase the
equipment and then transfer them in financial leasing), who delivers the lease
to another company - owned by Churchill group - which after subleases it to
the first two companies of the Churchill Group (CML and CARC).
The European Supreme Court held that while this Weald Leasing scheme is
artificial and unusual, such facts by itself does not mean to be contrary to the
objectives of the Directive on VAT19.
However, the European Supreme Court in a recent ruling in case Ocean
Finance (process c-653/11) of 20 June of 2013 suggests a change in the
requirements of the "practice abusive", artificial transactions, without
substance, carried out with the sole purpose of obtaining a tax advantage are
contrary to the objectives of the law20; giving to understand that to comply with

17

Idem, p. 9
DE LA FERIA, Rita. HMRC vs Weald Leasing Ltd-not only artificial-the abuse of law test in VAT. En: British Tax
Review Nro. 5, London: Ed. Thomsom Reuters, 2008, p. 553.
19
Idem.
20
DE LA FERIA, Rita y SILVA COSTA, Mario. O impacto de Ocean Finance no conceito de abuso do direito para
efeitos de IVA. En: Revista de Finanas Pblicas e Direito Fiscal, Nro. 3, Ao 6. Lisboa: Ed. Instituo de Direito
Economico Financeiro e Fiscal, febrero 2014, p. 324.
18

General Antiavoidance Rules in LATAM and cause of contract 5

the European Directives on VAT transactions will not be considered abusive
if their economic substance should be assessed.
In other words, according to this latest ruling, there is an abusive practice
contrary to the purpose of the VAT Directive, if the transaction or transactions
lack economic substance21.
2. Business purpose test y substance over form.
2.1 Business purpose test.
The origin of the doctrine of the business purpose is the case Helvering v.
Gregory of 193522 of great influence in the countries of the Commonwealth
and the continental law23.
The motivation of Gregory shareholder was to transfer its shares, avoiding
that the company "A" sells directly because the dividends which then received
Gregory will be taxed, so Gregory constitutes a new company and gives his
shares which immediately dissolved to receive shares and after sell them taxfree applying the reorganization Act24 .
It follows, the purpose of just lowering taxes does not justify that reject the
preferential tax treatment provided by reorganization Act, but the absence of
business purpose to carry out the reorganization25.
This doctrine does not attack the civil or commercial validity of the contract
chosen by taxpayers just for tax avoidance purposes26, except its tax effects
applying the tax consequences of the avoided contracts.
To qualify a transaction as not tax avoidance because of tax advantage, the
transaction must have a business reason and not a sole aim of reducing tax
burden27, which is control over the specific cause of the contract28.

21

En la sentencia Ocean Finance, el TJUE declara: Las estipulaciones contractuales, aun cuando deban tomarse
en consideracin, no son determinantes para identificar al prestador y al destinatario de una prestacin de
servicios a efectos de lo dispuesto en los artculos 2, nmero 1, y 6, apartado 1, de la Directiva 77/388/CEE del
Consejo, de 17 de mayo de 1977, Sexta Directiva en materia de armonizacin de las legislaciones de los Estados
miembros relativas a los impuestos sobre el volumen de negocios Sistema comn del impuesto sobre el valor
aadido: base imponible uniforme, en su versin modificada por la Directiva 2000/65/CE del Consejo, de 17 de
octubre de 2000. En particular, puede prescindirse de las estipulaciones cuando se pone de manifiesto que no
reflejan la realidad econmica y mercantil, sino que constituyen un montaje puramente artificial, carente de realidad
econmica, realizado con la nica finalidad de lograr una ventaja fiscal, extremo que debe ser apreciado por el
rgano jurisdiccional nacional.
22
Sentencia de la Corte Suprema Norteamericana [(1935) 293 US 465]. En:
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=293&invol=465
23
RUIZ ALMENDRAL, Violeta. Ob. Cit, p. 86.
24
The case involves a taxpayer Gregory who creates the company "A" that is 100% shareholder of the company "B",
the company "B" has buyer but if the sold "A" will pay taxs on dividends in favor of Gregory. Then, Gregory creates a
company "C" to which "A" transferred "B" shares and agrees with "C" will not issue shares at "A" but at Gregory.
Gregory has 100% shares of "A" and "C" and the latter has as active actions of "B" (which wants to sell). Six days of
created the company "C" dissolves and their shares are delivered to Gregory who sells them from "B" to a third party
and declared them as capital gains does not affect taxes for the corporate reorganization law, while the tax
authorities described them as dividends taxed with the tax.
25
CAHN-SPEYER W. Paul. Ob. Cit, p. 44.
26
GOTLIB, Gabriel. El Examen del propsito negocial (Business pupose test). En: Interpretacin econmica de las
normas tributarias. Buenos Aires: Ed. Abaco de Rodolfo de Palma, 2004, p. 612.
27
WAHN, Werner. Elusin tributaria y normas anielusivas: su tratamiento en el Derecho Comparado, algunas
conclusiones al respecto. En: Revista de Estudios Tributarios Nro. 5. Santiago de Chile: Centro de Estudios
Tributarios Universidad de Chile, diciembre 2011, p. 8.

6 Angel Marco Chavez Gonzales

The economic reasons are the objective purpose of the transaction that
should not be confused with the subjective motives of the parties, "the motive
to reduce taxes is irrelevant, what counts is the absence of a business
purpose that give sense to the transaction. This distinction remembers vividly
the cause of the continental dogmatic doctrine"29.
Business purpose doctrine empowers tax authority to assess a transaction
when its contractual cause is broke to avoid a tax, and to apply the tax
consequences of the avoided transaction.
2.2 Substance over form.
The principle "substance over form" empowers the tax authorities to ignore
the legal form of transaction to address forms of simulation, however it can
get results anti-tax avoidance 30 as "assess a transaction according to its
substance"31 when its economic essence is objectively contrary to its legal
form32.
Legal form refers to the legal constructions and legal conditions used in civil
law, while the substance refers to the economic content of the transaction33.
"Substance over form" is a tool to investigate the facts and its relationship with
the legal forms used by the parties34 to include the facts in the tax rule, while
principle of economic qualification35 or legal qualification36 37 of the facts is
used in Latin American countries.
In Latin America legal qualification of the facts is an ordinary power of the tax
authority attributed by the tax code; however other Latam countries without a
tax law authorizing it, apply rules of interpretation and principle of abuse of
law to obtain similar results.

28

Distinction between cause as individual practical reason and cause like social economic function see the point 6 of
this investigation: The cause as individual function and contractual type.

29

PALAO TABOADA. Los motivos econmicos vlidos en el rgimen fiscal de las reorganizaciones empresariales.
Citado por: PEREZ DE AYALA, Jos. El nuevo artculo 15 de la Ley General Tributaria. En: Estudios de Derecho
Financiero y Tributario en Homenaje al profesor Calvo Ortega. Madrid: Ed. Lex Nova, 2005, p. 158.
30
GARCIA NOVOA, Csar. La elusin fiscal y los medios para evitarla. Ob.Cit, p. 113.
31
This doctrine differs from another doctrine economic substance which postulates the need that the transacctions
produce a significant change in the position of taxpayer, potential securing of benefit, assumption of risk. MARIN,
Gloria. La relevancia jurdica de la motivacin fiscal: influencia del business purpose test. Madrid: Ed. Dykinson,
2009, p.45.
32
CAHN-SPEYER W. Paul. Ob. Cit, p. 45.
33
AA.VV.Cahiers de Droit Fiscal International: Form and Substance in Tax Law (IFA Cahiers), 2002, IFA Kluwer
Law International.Pg. 22 y ss .
34
ALTAMIRANO, Alejandro. La regla del substance over form y la influencia del Derecho Anglosajon sobre el
Derecho Argentino. En: Interpretacin Econmica de las normas tributarias. Buenos Aires: Ed. Abaco de Rodolfo
Depalma, 2004, p.469
35
MARIN, Gloria. La relevancia jurdica de la motivacin fiscal: influencia del business purpose test. Ob.Cit, p.4
36
The subsuncion of the fact in the legal hypothesis is known as a juridical qualification. TARSITANO, Alberto. La
clusula antiabuso en el derecho tributario argentino. El fin de la elusin?. Ob, Cit, p, 29.
37
We believe that it is better to name this process like juridical rather than economic qualification, every time than the
fact, operation or activity which is embodied in the law is juridiza and the qualification of the facts or economic acts
carried out by taxpayers will be based on legal criteria to determine if they conform to the taxable fact foreseen in the
law, for example through the calficacin legal it dispenses with the formal contract of location of services to find out
the true nature of the economic relationship which is taxed by the law. CHAVEZ GONZALES, Angel Marco. La
Norma VIII del Titulo Preliminar del Cdigo Tributario Peruano. En: Revista Derecho y Sociedad Nro. 20, PUCP,
julio 2003, p. 209.

General Antiavoidance Rules in LATAM and cause of contract 7

In both cases, tax authority assess the transaction with respect to the tax law
not becoming an instrument to prevent tax avoidance although in practice
there were used to achieve results anti-avoidance38.
For example, in Latin America, Peru, its former Norma VIII of the Tax Code
empowered the tax authority just to qualify the facts, however Tax Court
examined in case Nro. 10923-8-2011 the tax avoidance nature of a corporate
reorganization.
Mexico without a tax law that empowers the tax authority to qualify the
transaction arranged by the taxpayers, the Court based on the rules of
interpretation and the principle of the abuse of law examined a case of tax
avoidance in case law Nro. 30376/07 (17-06-2009).
3. Reception of the General anti-avoidance rules in Latin America.
Latin American countries have incorporated in their tax codes rules39 about
substance over form (qualification of the facts) or business purpose test (get
rid of "anomalous" transactions), for these reasons we make the following
classification:
3.a. Latin american countries that have incorporated substance
over form and business purpose test in their tax codes.
General anti-avoidance rules of several countries in Latin America in
their first paragraph use different words "determine the true nature", "you can
ignore", "attributed a meaning according to the facts", to "qualify" (see table I)
which means a recognition of the doctrine substance over form.
Those same general anti-avoidance rules in other paragraph use the
terms "inadequate", "inappropriate", "artificial" or "atypical" transactions to
obtain a tax advantage (see table I), which means to investigate the business
purpose or cause of contract as a specific cause of business to ignore the
abnormal transaction chose by the taxpayers to apply the tax consequences
that correspond to the genuine transaction.
In Argentina the procedures Act tax nro. 11,683 in its article 2 prescribes that:
"To determine the true nature of the taxable transactions will attend events,
situations and economic relations which perform effectively, pursue or
established by taxpayers. When they submit these events, situations or
relationships to forms or legal structures that are not manifestly which private
law provides or authorizes to properly configure the cabal economical and
effective motive of the taxpayers will be dispensed with in consideration of
taxable event, of the forms and inadequate legal structures, and it will be
considered the economic situation as framed in the forms or structures that

38

GARCIA NOVOA, Csar. La elusin fiscal y los medios para evitarla. Ob.Cit, p. 113.

39

LATAM Tax Codes http://www.ciat.org/index.php/es/productos-y-servicios/ciatdata/legislacion.html

8 Angel Marco Chavez Gonzales

the private law would apply regardless of the chosen by taxpayers or allow
them to implement as the most appropriate to the genuine intention of them ".
Numeral II of the article 8 of the Bolivian tax code, law nro. 2492, August 2th
2003, indicated:
"II. When the rule relating to the taxable fact relates to situations defined by
other legal branches, without reference or expressly deviate from them, the
interpretation should be assigned the meaning that best adapts to the
economic reality.
To determine the true nature of the taxable fact will be considered:
a) when the taxpayer adopt legal forms manifestly inappropriate or atypical to
the economic reality of the encumbered facts, acts or underlying economic
relations in such forms, the tax rule applies irrespective of these forms,
without prejudice to the civil legal effectiveness that they have or other legal
area.
(b) act or transaction in which there is simulation, will be taxed the fact taxed
effectively carried out by the parties irrespective of the forms or legal names
used by those interested. The simulated transaction will be irrelevant for tax
purposes".
Article 869 of the Colombian tax code provides:
"Constitutes abuse or abusive behavior in tax matters, use or implementation,
through an operation or group of operations, any entity, legal act or
procedure, to alter, deface, or artificially modifying the tax effects that
otherwise would be generated, at the head of one or more taxpayers or
responsible for taxes or their related partners or shareholders or actual
beneficiaries defined in accordance with article 61113 of 2010 Decree 2555 or
rules that modify it or replace it, with the aim of obtaining profit tax, consisting
among others, in the elimination, reduction or deferral of the tax, the increase
of the balance to favor or tax losses and the extension of benefits or tax
exemptions unless such effects are the result of a business purpose or
genuine and reasonable transaction may be the main cause for the use or
implementation of the respective entity, legal act or procedure. Not mean that
there is abuse when the taxpayer by fulfilling the relevant requirements, gets
benefits expressly enshrined in the law, without take to such effect,
mechanisms, procedures, entities or contrived acts. The fraud to the law for
tax purposes, constitutes abuse in tax matters".
Costa Rica tax code, law Nro. 4755 , May 3th 1971 , in its article 8 states:
"When the law relating to the taxable fact relates to events defined by other
legal branches, without reference or expressly deviate from them, the
interpreter can assign the meaning that best adapts to the reality of the fact
considered by the law.
Legal forms taken by taxpayers do not oblige the interpreter, who can
attribute to the situations and events that occurred a meaning consistent with
the facts, when from the tax law arises the fact of the respective obligation

General Antiavoidance Rules in LATAM and cause of contract 9

according to the reality and not the juridical form.
When legal forms are manifestly inappropriate to the reality of the
encumbered facts and this translates into a decrease in the amount of the
obligations, the tax law should be applied irrespective of such forms".
Article 4 of the Chilean Tax Code indicates:
Taxable facts contained in the tax laws will not be able to be avoided by
means of the abuse of the juridical forms. It will be understood that abuse
exists in tax matter when the materialization of the taxable event is prevented
from occurring either partially or totally, or the taxable base or the tax
obligation is reduced, or the obligation is delayed or deferred by means of
legal acts or transactions that, individually or together do not trigger significant
legal or economic effects for the taxpayer or a third party other than merely
tax effects.
It is legal the reasonable option of conducts and alternatives contemplated in
the tax legislation. Consequently, there will not constitute an abuse the alone
circumstance that the same economic or juridical result could obtain with
other or other juridical acts that would derive in a major tax load; or that the
chose juridical act, or set of them, does not generate any tax effect, or
generated them in a way limited or deferred in the time or in less quantity,
whenever these effects are a consequence of the tax law. In case of abuse
will be required the tax obligation emanating from the taxable facts
established by law".
Rule XVI of Preliminary Title of Peruvian Tax Code stipulates:
"To determine the true nature of the taxable transactions, SUNAT will take
into account events, situations and economic relations performed effectively,
pursued or established by tax debtors.
In the event that are detected cases of circumvention of tax rules, the National
Superintendency of customs and tax administration - SUNAT is empowered
to demand the tax debt or reduce the amount of balances or credits in favour,
tax losses, tax credits or remove the tax advantage, without prejudice to the
restitution of the amounts that have been wrongly returned.
Avoid total or partially the accomplishment of the taxable fact or reduce
taxable income or the tax debt, or obtain balances or credits in favour, tax
losses or credits for taxes by means of acts regarding those who present
concurrently the following circumstances, supported by SUNAT:
a) individually or together are artificial or unfit for the attainment of the result
obtained.
(b) that its use resulted in any legal or economic effects other than tax
savings or advantage, which are equal or similar to those who had obtained
with usual or proper acts.

1 Angel Marco Chavez Gonzales

0
SUNAT will apply the law that correspond to the usual or proper acts, and will
execute the second paragraph, to the case.
Tax credit means credit in favour of the exporter, the tax refund, advance
recovery of IVA , return of IVA , refund of customs duties and any other
similar concept established in the tax rules that do not constitute improper
payments or excess.
In the case of simulated transactions qualified by the SUNAT under the first
paragraph of this standard, shall apply the tax law corresponding, in response
to the acts effectively carried out " 40 .
Paragraph I of the article 2 of tax code of the Dominican Republic, law Nro.
11-92, May 16th 1992 and amended provides that:
"The legal forms taken by taxpayers do not oblige the tax administration,
which can attribute to situations and events that occurred a meaning
consistent with the facts, when from the tax provisions emerges the event
was defined according to the reality. On the other hand, when the event is
defined according to the legal form, it will have to abide by this one.
Paragraph I. When the legal forms are manifestly inappropriate to the reality
of the facts encumbered and this will translate into a reduction in the amount
of obligations, the tax provisions shall apply regardless of such forms".
Venezuela law nro. 37.305, October 17th 2001, article 16 states:
"When the provisions relating to the taxable transactions relates to situations
defined by other legal branches , without reference or to depart from them, the
interpreter can assign the meaning that best adapts to the reality considered
by tax law.
To qualify the acts or situations that configure the taxable facts, the tax
authority, in accordance with the procedure of examination and determination
provided for in this Code, it can ignore the incorporation of companies,
contracts and, in general, the adoption of forms and legal procedures, when
these are manifestly inappropriate to the economic reality pursued by
taxpayers and this translates into a decrease in the amount of the tax
obligations."
Finally, article 11 of the model of tax code of the Inter-American Center of tax
administrations (CIAT) 2006 which establishes:
"1. When performing acts which, individually or together, are contrived or unfit
for the obtaining of the result achieved, tax consequences applicable to
parties that involved in such acts will be that corresponding to the acts
suitable or appropriate for obtaining the result that has been reached.

40

Article 8 of Law No. 30230, published on 12.7.2014, suspends the faculty of the SUNAT to apply this Standard,
with the exception of the provisions of the first and the last paragraphs.

General Antiavoidance Rules in LATAM and cause of contract 1

1

2. The provisions of the preceding paragraph shall apply only when the
contrived or improper acts produce the following effects:
a) Such acts derived economic effects equal or similar to those who had
obtained with suitable or appropriate acts. It is considered that equal or similar
effects occur when outcomes economic, other than the tax, no relevant
differences.
(b) The tax effects consists in the elimination or reduction of tax liabilities".
In conclusion, the aforementioned GAAR incorporate the doctrine of
substance over form because they use the terms "determine the true nature",
"you can ignore", "attributed a meaning according to the facts" or "qualify" in
order to apply the tax consequences to the fact actually occurred (see table I);
and also incorporate the business purpose test when use the words
"inadequate", "improper", "artificial" or "atypical" transaction which purpose is
only to get a tax advantage circumventing the transaction that corresponds
(see table I), that means to investigate the business purpose as a specific
cause of the transaction in order to assess the anomalous legal forms chose
by the parties that not reflect economic reality applying the tax consequences
that correspond to the genuine transaction.
3.b. Countries of Latin America that incorporate substance over form
in their tax codes.
The countries that apply the doctrine of the substance over form known in
Latam countries like juridical qualification of the facts (Table I) which empower
the fiscal authority to examine if the economic reality of the transaction
entered by the taxpayer are within the tax provision, it is not an instrument
against tax avoidance, however in practice the courts has used it to obtain
results anti-tax avoidance.
The Brazilian tax code in its article 116 according to Law Nr. 5172 25 October
2006 and amended, provides:
"Unless the law commands otherwise to the contrary,it is considered that
there has taken place the taxable fact and existence of its effects: in the case
of the situation of fact, from the moment in which meet the material
circumstances needed to produce effects that are normally own;
II. in the case of legal situation from the moment that is definitely constituted,
in accordance with the applicable legislation.
Sole paragraph41. The tax authority may disregard acts or transactions made
in order to disguisse the occurrence of the tax fact or the constituent
elements of the tax obligation, in accordance with procedures that will be
established by legislation".
The

Federal

Court

of

Minas

Gerais

42

Brazil,

case

Nro.

AC

41

Paragraph introduced by the complementary Act 104/2001. Not is has dictated the Act ordinary of procedures that
makes reference.
http://tj-mg.jusbrasil.com.br/jurisprudencia/114798156/ap-civel-reex-necessario-ac-10145095623958003-g/inteiroteor-114798206

42

1 Angel Marco Chavez Gonzales

2
10145095623958003 MG March 7th 2013 held in order that the tax rule can
disregard the legal entity of the corporation, it needs an additional tax
regulation.
The tax code of Ecuador and amended in article 17 expresses:
"When the fact consists in a legal act will be assess according to its true
essence and legal nature, whatever is the chosen form or the name used by
stakeholders.
When the taxable fact is delimited according to economic concepts, the
criterion to qualify them will take into account situations or economic relations
that effectively exist or are established by interested parties, irrespective of
the legal forms that are used ".
Supreme Court of Ecuador case nro. 271-2010 assessed a international loan
between related parties that qualified as provision of funds in consequence
did not allow deduction of interest43.
Tax Code of Guatemala, Decree Nro. 6-91 (published on the April 3th 1991)
and rules amended by Decree Nro. 4-2012, article 16 "a" says:
Tax authority will make adjustments, when taxpayers at the expense of tax
collection: a) conceal the legal character of the business being declared,
giving the appearance of a different nature; b) declare or falsely confess what
actually has not happened or has been agreed between them; or, c) constitute
or convey rights to interposed persons, to keep unknown the truly interested.
In these cases, the tax authority will make adjustments and shall notify the
taxpayer or responsible, without prejudice to initiate criminal actions, when it
corresponds."44
Article 247 of the Law nro. 125/92 of the Paraguay and article 6 of the Act nro.
15,903 of Uruguay express that:
"When the tax provision concerning the taxable fact relates to situations
defined by other branches of law, without reference or deviate expressly of
the concept that they establish, it is necessary to assign the meaning that
more adapts itself to the reality considered by the law. Legal forms taken by
individuals do not oblige the interpreter; who must attribute to situations and
events that occurred a meaning consistent with the facts, whenever from the
analysis of the regulation arises the taxable fact defined according to the
reality and not the legal form.
The Supreme Court of Paraguay case nro. 556-2000 held that the tax
authority can not collect a tax on dividends just because exist a profits in
books when it was verified that profits have never been transfer45.

43
44
45

http://www.cortenacional.gob.ec/cnj/images/pdf/sentencias/contencioso_tributario/2012/agosto2012/271-2010.pdf
Provisionally suspended by the Constitutional Court of Guatemala record number 1898-2012 on May 26th 2012.
http://www.abc.com.py/articulos/libro-sobre--jurisprudencia-tributaria-335301.html

General Antiavoidance Rules in LATAM and cause of contract 1

3

46
The Administrative Court of Uruguay case nro. 442-2013 qualified like one
corporation two separate corporations for tax purposes.
In conclusion, the aforementioned GAAR used the terms "determine the true
nature", "you can ignore", "attributing a meaning according to the facts",
"qualify", "you make adjustments" which means recognize "substance over
form" doctrine better known in our countries as legal qualification of the facts
(Table I).
Table I
GAAR

Latam countries

Argentina
Bolivia
Brasil
Colombia
Costa Rica
Chile
Ecuador
Guatemala
Paraguay
Per
Repblica Dominicana
Uruguay
Venezuela

Qualification of the facts Ignore the anomalous

(substance over form)
legal forms (business
purpose).
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X

3.C. Latin American countries that not incorporated GAAR rules in their
tax codes.
Latin American countries that have not incorporated GAAR rules however
have rules for the interpretation of the tax rules and the principle of abuse of
law that have not prevented in some of them a jurisprudential development of
the "substance over form" known in Latam countries as "legal qualification of
the facts" under the Principle of abuse of law47 48(Table II).
The principle of the abuse of the law requires that the fundamental rights as
the subjective rights not to exercise with excess but limited by the purpose of
the law, and by the social function of the subjective rights and the good faith49,

46

www.tca.gub.uy/visornew.php?numero=442&ano=2013
RUSSO, Raffaele. Ob. Cit, p. 207.
48
Principle of abuse of law is derived from the general principles of good faith, good practices and equity. ORDOQUI,
Gustavo. Abuso de Derecho en Civil, Comercial, Procesal, Laboral y Administrativo. Lima: Ed. Ediciones Legales,
2014, pag. 139.
49
RODOVALHO, Thiago. Abuso de Derecho y Derechos Subjetivos. Lima: ARA Editores. 2014, p. 59.
47

1 Angel Marco Chavez Gonzales

4
the abuse of law is not invoked to set aside a provision or a contract, but to
be respected the rules and contracts within the purposes of the law50.
Tax code of El Salvador Decree No. 230 (published in the Official Journal No.
241 the 22.12.2000) and rules amended., in its article 7 establishes: "tax
regulations shall be interpreted in accordance with the criteria accepted in law
and always in the context of the Constitution.
While not be defined by the tax law the terms used in their provisions shall
be understood in accordance with its legal, technical or common sense as
appropriate.
Analogy will not be admitted to extend beyond its strict terms the scope of the
taxable fact or the exemptions".
This country does not register a case of application of economic substance
over form.
Honduras, the tax code, Decree No. 22-97, May 30th 1997 and amended rules
indicates in its article 6:
"The interpretation of the provisions of this code will be what prescribes the
preliminary title of the Civil Code in articles 17, 18, 19 and 20.
The tax laws are always interpreted strictly to determine its meaning and
scope may not be used methods of interpretation extensive or analogy".
There is no jurisprudential case for the application of substance over form.
In Mexico the article 5 of the Fiscal Code of the Federation Decembre 12th
1981 and standards modificatorias says:
"The tax provisions which establish taxes to individuals and exemptions to
them, as well as the setting infringements and sanctions, are strict
enforcement. It is considered that provisions set taxes to individuals when
refer to the subject, object, base, rate or rate.
The other tax provisions be interpreted by applying any method of legal
interpretation. In the absence of tax rules, the provisions of the federal
common law shall apply when their sense is not contrary to the nature of the
tax."
The case nro. 30376/07 June 17th 2009. Chamber Metropolitan Region of the
Federal Fiscal Court and Administrative Justice of Mexico, implemented the
clause substance over form based on the rules for the interpretation of the law
and the principle of abuse of law51 :

50
51

ORDOQUI, Gustavo. Ob. Cit, p. 193

https://www.academia.edu/6673637/CODIGO_FISCAL_DE_LA_FEDERACION_2014

General Antiavoidance Rules in LATAM and cause of contract 1

5

"To accept that under our legislation can survive the fraud to the law or the
abuse of the law, meaning "fraud to the law" accomplishment of one or a
series of lawful acts which respect the text of the law, but not its meaning,
and for "abuse of law" the legal form or exercise of a right which contravenes
the spirit of law: "summum ius, summa insult", this would come to the extreme
of allowing individuals so pretext of interpretations lyricists by means of a
series of legal acts, they circumvent the law and its meaning".
The Tax Code of Nicaragua article 4 of Law No. 562 (Published in the Gazette
No. 227 the 11.23.2005 ) expresses:
"The Tax provisions should be interpreted in accordance with all methods
supported by the Law and those in the International Conventions on the basis
of international law. In any case, the interpretation is an objective eminently
enlightening or explanatory and does not imply in any way that in this way to
be able create, alter, modify or delete existing legal provisions. The situations
that cannot be settled through the provisions of this Code or of specific laws
on each subject, shall be regulated supplemented by the provisions of Law.
The analogy is acceptable procedure to fill the existing gaps in the law, but it
cannot create taxes, or exemptions, waivers or other benefits, nor can
criminalize offenses or crimes, nor establish penalties. We can not apply the
analogy when by this way is oppose, alter or modify any of the existing legal
tax provisions".
It does not have a jurisprudential case that applies the qualification of the
facts over the form.
As shown in table II, although these countries do not incorporate GAAR rules
into their tax codes are not impediment to their jurisprudence use the
principle of substance over form or "legal qualification of the facts" like Mexico
based on their methods of interpretation of tax law and the principle of the
abuse of the law.
Latam countries

El Salvador
Honduras
Mexico
Nicaragua

Tabla II
Interpretation of
GAAR
law
Qualification of Ignore
the
facts
anomalous
legal
(Substance
forms
(business
over form)
purpose).
X
X
X
X

4. Elements of GAAR.
4.1 Acts "Inappropriate", "improper", "atypical", or "artificial".

1 Angel Marco Chavez Gonzales

6
The XXIV Conference of Latin America's tax law held that the General antiavoidance rules pose risks to the legal security of the taxpayer, because what
should have rather concrete concepts 52 and not abstract ("abnormal",
"unusual" or "atypical" legal forms), opens a huge door to the interpretation of
the tax authority to qualify any lawful transaction as 'abnormal' "unusual" or
"atypical ", affecting the legal certainty53.
As shown in table I there are Latin American countries whose general antiavoidance rules use the terms "inappropriate", "improper", "atypical", or
"artificial" whose meaning we specify.
The terms "inappropriate" or "improper" are equivalent since they refer to the
legal form chose by the parties through which have achieved legal or
economic results not appropriate to that transaction54 which lead us to the
cause of contracts of the Civil Law.
"Artificial" can be understood as "atypical" as opposed to usual or regular
practice on the market, i.e., refers to atypical contracts built by financial or
fiscal 55 engineering which contractual cause lacks comercial purpose
addresed at circumventing the tax.
In the background of these " inappropriate","improper","atypical", or"artificial"
transactions are the lack of business purpose, since these transactions
produce the same legal or economic effects that another legal form
appropriate to the operation, except that the chose legal form has a motivation
purely fiscal56.
An often used example is the owner who wish to sell a property but is subject
to a tax charge, instead if incorporate a company with the buyer, one
contributes property and the other money, after a time they decide dissolve
the company so the landlord gets the money and buyer gets the property
exempt of taxes.
The company incorporated is "anomalous" to the economic operation
because another regular operation as the sales contract is suitable to the
operation producing the same result, the transfer of the property.
However the chosen legal form has an exclusively tax purpose, it is
addressed at circumventing the tax burden in violation of the ends of the law
which grants it.
In conclusion, the tax avoidance aims to obtain a economic result that the law
wanted tax, which reaches the taxpayer with alternative transctions atypical

52

Octava Conclusin de la Resolucin Tema 1: La elusin fiscal y los medios para evitarla. En: XXIV Jornadas
Latinoamericanas de Derecho Tributario. Ob. Cit.
53
GARCIA ESCOBAR, Jaime. Clausula General Antieleusiva. En: La Semana Juridica, Santiago de Chile. Enero
2014. En: http://www.jaimegarciaabogado.cl/wp-content/uploads/2014/03/Clasula-General-Antielusiva-La-SemanaJur%C3%ADdica-enero-2014.pdf
54
LOPEZ TELLO. El conflicto en la aplicacin de la norma tributaria. Citado por: PEREZ DE AYALA. Ob. Cit, p.
156.
55
Idem, p. 161
56
See point 6 of this paper: Specific cause of contract and contractual type.

General Antiavoidance Rules in LATAM and cause of contract 1

7

or abnormal, it is the artificiality of the parallel routes to achieve the same
economic result, it is lack of correspondence between this result and the
cause of the contract protected by the legal system57.
4.2. Tax Advantage.
The concept of tax advantage is especially broad, and refers to any result
that involves exemptions, deferral of taxes or application of a more beneficial
tax standard.
The Court of Justice of the European Community has issued rulings with
respect to VAT, as Halifax case where asked, if the obtaining of a tax
advantage must be the sole purpose or simply the main objective of the
artificial transaction to treat them as abusive, the Court of Justice confirmed
that a transaction may be considered abusive even when obtaining a fiscal
advantage constitutes simply the main or sole purpose of the transaction or
transactions in question58.
The aim of circumvent the tax rules to enjoy their tax advantages, is
illegitimate when it is the essential purpose of the transaction59 and the other
non fiscal reasons are negligible60 .
4.3. Procedure for the application of the GAAR.
To qualify a transaction as elusive, the following procedure 61 should be
applied which consists of:
First, the tax authority should identify an appropriate contract that produces
the same civil and commercial effects as the legal form chosen by taxpayer
except the tax advantage provided by the law;
Second, check if the legal form carried out by the taxpayer is appropriate to
the business purpose at transaction62, it is a sort of analysis of the business
purpose, since such "improper contract" should be given together with the
absence of that business purpose63; and

57

TARSITANO, Alberto. La clusula general antiabuso en el modelo del Cdigo Tributario para Amrica Latina. En:
Modelo de Cdigo Tributario para Amrica Latina. Tendencias actuales de tributacin.Bogota: Ed. Universidad del
Rosario y del ICDT, 2010, p. 348.

58

The ECJ was asked in that case whether the accrual of a tax advantage must be the sole aim or just the principal
aim of the transaction or the transactions in question before the practice can be treated as abusive. Predictably, the
ECJ confirmed that a practice can be deemed to be abusive, even where the accrual of a tax advantage constitutes
merely the principal aim of the transaction or transactions at issue. DE LA FERIA, Rita. HMRC vs Principal and
Fellows of Newnham College in the University of Cambridge, Ob.Cit, p. 550.
59
Vase TJCE, sentencia de 21 de febrero 2006, C-425/06, Part Service apartado 44 , y TJCE, sentencia del 26 de
octubre del 2010, C-103/09, Weald Leasing.
60
Recommendation of the European commission on the aggressive fiscal planning of December 6, 2012
(2012/772/UE), punto 4.6.
61
CRAZZOLARA, Arnao. Abuso del Diritto ed elusione fiscale: La Clausola Generale Antiabuso nel Diritto
Tributario Tedesco. En: Diritto E Practica Tributaria Internazionale. Vol. VII, Nro.1 , Milan: Ed. CEDAM, 2010, p. 49.
62
Idem.
63
RUIZ ALMENDRAL, Violeta. Ob. Cit, p. 81.

1 Angel Marco Chavez Gonzales

8
Finally, the taxpayer has the opportunity to demonstrate the existence of non
tax reasons that validate the contract qualify as "inappropriate" 64since not all
legal forms by the mere fact of being "inadequate" has to assume that they
are motivated solely for tax reasons.
In consecuence, non tax reasons must be relevant, important, not apparent
or subordinated to the tax benefit, in such a way they can be compared with
the tax factor.
In practice, if the tax authority qualifies as "inadequate" the contract chosen
by the taxpayer, will be the taxpayer who is entitled to demostrate the non tax
reasons as a "cause" of the contract that "validated the result reached by the
suspected contract"65.
5. Abstract cause of the contracts as economic function.
The contract is an agreement of consents of two is formalised or more
people, producing a confluence of interests that is consolidated in the cause,
understood as the practical role of contract tends to make effective66.
In Latam countries, on the issue of contracts is has taught is that the
economic activity carried out by the parties fits at the cause of the contractual
type regulated by the legislation. It follows that the analysis of the business
purpose is that the tax authorities examine if the economic results obtained by
the parties are usual to the cause of the contractual type as the abstract
socio-economic function of each contractual type apart from of the individual
motivations of parties.
Thus, the abstract cause - social-economic function of the contratct - "is that
feature constant and unchanging of the contractual regulation does not take
into account the specific context nor the purpose specific persecuted even
when they have been assumed by both parties, for example, the cause of the
sales on the market would be constituted by the exchange between the goods
and the price without having relevancy what kind of goods or what price,
neither the purpose or common budget of both parties in relation to the
destination or the usefulness of the goods"67.
The inseparable relationship between abstract cause and contractual type
arises because all contractual type has a social economic function, because
its legal structure synthesizes abstractly a given economic transaction, which
once typified with in law expresses a typical and abstract business function68,
away from goals, motives and interests of the parties which is the cause as
practical and concret function of the contract69.

64

CRAZZOLARA, Arnao. Ob. Cit, p. 43.

TARSITANO, Alberto. La clusula antiabuso en el derecho tributario argentino. El fin de la elusin?. Ob. Cit, p.
34.
66
GARCIA NOVOA, Csar. La elusin fiscal y los medios para evitarla. En: XXIV Jornadas Latinoamericanas de
Derecho Tributario, ILADT, Isla Margarita, Venezuela, 2007, p. 29
67
VASQUEZ REBAZA, Walter. Los contratos coligados en fraude a la ley. Con especial referencia al modelo jurdico
italiano. En: Cuaderno de Trabajo del CICAJ N. 9. Lima: PUCP, 2013, p. 28
68
GABRIELLI, Enrico. Estudios sobre Teora General del Contrato. Lima: Ed. Jurista, 2013, p. 61.
69
BIANCA, Massimo. Derecho Civil. Vol 3. El Contrato. Bogota: Universidad Externado de Colombia, 2007, p. 472.
65

General Antiavoidance Rules in LATAM and cause of contract 1

9

For example "each contractual type gives legal effect to certain way of
economic exchange: sales contract goods are changed for money; personal
services are changed by a remuneration; partnership contract goods are
changed by the recognition of the status of partner and so on. This quality to
set effects as general social economic function is the cause of every typified
contract"70.
We believe that this joint between "cause" and "type of contract" should be
revised, since the organization of the economic interests of the parties can
overflow the "contractual type" which only gives us an abstract structure
away from them, while the "cause" is self regulation of interests, economic
purposes, economic context of the contract, constitutes the specific economic
function of business concluded by the parties in addition to the typified
contractual interests in the law.
We have expressed in point 4.3) this research that the contractual figure
chosen by the taxpayer can not be reassess if objectively prove the non fiscal
reason, however the administrative authority or court do not take into account
because they interpret that prevails is the abstract cause of the contractual
type.
For example in Peru the Tax Court case Nro. 10923-8-2011 a banking
company constituted a related construction company that builded an office
building, the construction company received a loan of the Bank and then the
construction company was split off so its patrimonial block composed by the
building had zero value because the active assets (the building) that is
transferred is of equal value that the passive (accounts payable to the Bank).
It follows that not was issued shares to the shareholders of splitCo because
the building was transferred to the banking company for paying off debt
loan, this operation was recharacterize as sales contract taxed with VAT and
ignored the tax exempt corporate reorganization.
The taxpayer demonstrated that the non fiscal reason to do the split-off was
due to banking regulations that set a level of debt among related companies
and may not exceed 30% of banking company assets, the split-off reduced
the level of indebtedness in such a way that it does not violate the banking
standard.
The tax court held that the non fiscal reason for the taxpayer is irrelevant
because it does not obey the purpose (social economic function) of the splitoff, which is the company that receives the heritage block have to continue
with legal and economic activity with which these were used in the transferee,
the banking company continues with the construction industry.

70

TALLEDO MAZU, Csar. El Congreso IFA sobre la forma y sustancia en el Derecho Tributario. En: Revista del
Instituto Peruano de Derecho Tributario Nro. 44. Lima: IPDT, abril 2006, p. 178.

2 Angel Marco Chavez Gonzales

0
It asks us: Does the abstract cause of the contract like social economic
function admits specific non fiscal reason? How to apply the GAAR to
examine specific non fiscal reason of the contract?.
6. Specific cause of contract and contractual type.
The Italian doctrine handled a concept of "specific cause", which is not
ignored by the Latin American countries 71 and which we believe is of
particular importance in the application of the GAAR.
The abstract cause as social economic function was refused to give place to
the revaluation of the individual theory of the cause as specific economic
function72, different from the concept of cause understood as social economic
function that gets together cause and contractual type, while "specific cause"
clearly identifies concrete economic result of typical or atypical contracts73.
The cause and contractual type identical to each other have led to postpone
the analysis of the individual economic context in which the contract is
celebrated "the core of the concept of cause, properly understood as reason
of business, as a justification for the movements of goods from an individual
to another"74.
The cause as economic social function of contractual type only protects
tipified interests but is insufficient to protect other interests pursued non
typified, can only be symmetrically protect both interests if the contractual
cause is an specific economic function because "contract is a combination of
essential and non-essential elements forming a block unit and as such should
be valued by the legal system, in effect, only in this way you can see the
meaning and breadth of the economic operation contract expresses"75.
The contractual type "is not anything other than an abstract regulatory
structure which contains the representation of a recurrent economic operation
in commercial practice"76, it is primarily a description, abstract and formal than
the legislator makes a certain recognized purposes (socio-economic
functions) 77 , that not represent the particular interest of the parties

71

In Peru has gathered jurisprudentially the cause as specific and concrete function in the Judgment of the
Supreme Court Cas. 3098-2011-Lima in our way it is possible to conclude that the cause links to the idea of
"individual or specific cause" that is to say to the intentions or common motives that give place to the celebration of
the juridical act in such a way that if these ends or motives are illicit the business will be void for lack of a structural
element.
72
VASQUEZ REBAZA, Walter. Los contratos coligados en fraude a la ley. Ob, Cit, p.29
73
MORALES, Rmulo. Contribucion a la teoria de los contratos conexos. En: Portal de Informacin y opinion legal
Pontifcia Universidad Catlica del Per. En: http://dike.pucp.edu.pe/doctrina/civ_art50.PDF p,2.
74
GAZZONI, Manuale di diritto privato, Napoli, 2007, XIII ed., 808 . Citado por: GABRIELLI, Enrico. Ponencia
presentada por el autor en el contexto de las XXIV Jornadas Nacionales de Derecho Civil, celebradas en Buenos
Aires por el 50 Aniversario (1963 2013), los das 26, 27 y 28 de septiembre de 2013 en la Facultad de Derecho de
la Universidad de Buenos Aires. En: http://www.juscivile.it/contributi/31%20-%20ENRICO%20GABRIELLI.pdf. p.
662.
75
FERRI, Giovanni Batista. Causa e tipo nella teora del negocio giuridico, Milan, 1966 , pag. 256. Citado por:
GABRIELLI, Enrico. Estudios sobre Teoria General del contrato. Ob. Cit, p. 62
76
GAZZONI, F. Manuale di dirrito privato. Napoli, 2003, XIII, p.808. Citado por: GABRIELLI, Enrico. Doctrina
General del Contrato. Vol. I. Uruguay: Fundacin de Cultura Universitaria, 2009,Vol. I. Ob. Cit, p. 24.
77
MORALES, Rmulo. Contribucion a la teoria de los contratos conexos. Ob. Cit.

General Antiavoidance Rules in LATAM and cause of contract 2

1

manifested and expressed in the contract as elements of the substantial
reason for business78.
We believe that the cause is practical reason of the contract, i.e. the interest
and purpose that contractual operation is addressed to meet79, "is all the
reasons and specific interests that determine the parties enter into the
contract; "it is the set of elements that respond to the question: why the
parties did the contract?"80.
Today is considered more appropriate to the demands of an evolved theory
and contract discipline, conceive the cause as specific: not as a reason that
justifies abstractly every contract pertaining to the type of the contract under
review (exchange between goods and price, if it's for sale), but as a reason
that individually justifies the concrete contract under review in the light of the
relevant specificities that characterize it (exchange between goods and
money in the particular context of circumstances and purposes and interests
in which those parties have scheduled it)81.
Therefore the cause as specific economic function is objective expression of
reasons, interest, concrete subjective purposes82 in the factual context of the
economic operations, is the "individual value that a specific business
operation (considered in the fullness of all its individual approach) assumes"83
that express the interests pursued by the parties beyond the abstract
contractual type84.
6.1. The purpose or motive in the specific cause of contract
Because the social economic function of the cause as a typical function of a
given contract (dogma of the irrelevance of motives) prevented the possibility
of give importance to the underlying specific interests of the contract, i.e. the
reason of business85.
However, it was clarified that the cause as specific economic function has a
meaning of motive: "we know that the notion of cause was managed by the
scholars who tried distinguish it from the empirical and personal wishes,
whims and will of the contracting party; therefore they observed it, and called
it function. But function can not mean something else than aim and purpose,

78

GABRIELLI, Enrico. Doctrina General del Contrato. Ob, Cit, p. 41.

BIANCA, Massimo. Derecho Civil. Vol 3. El Contrato. Ob. Cit, p. 469.
ROPPO, Vincenzo. Causa concreta: Una storia di successo? Dialogo (non reticente, n compiacente) con la
giurisprudenza di legittimit e di merito. En: Rivista di Diritto Civile, Anno LIX, N 4, Cedam, Padua, 2013, p, 976.
Citado por: MORALES, Romulo. El fin ilcito como la funcin econmico-individual ilcita o la causa concreta ilcita
en los contratos. En: Revista Dilogo con la Jurisprudencia. Nro. 183, Lima: Gaceta Jurdica, noviembre del 2013, p.
108.

79
80

81

ROPPO, Vincenzo. Il Contrato. En: Trattado di diritto privato. Citado por: CASTRO, Nelwin. Los presupuetos de la
resolucin judicial por incumplimiento. En: Revista Peruana Analisis del Derecho. Web: www.radjuris.com.
Diciembre 2008. En: http://www.radjuris.com/pdf/civil/preincum.pdf p.10
82
FERRI, Giovanni. El negocio jurdico. Traduccin y notas de Leysser Len. Lima: Ara Editores, 2002, p. 372.
83
D ANGEL, Andrea. Contrato y operacin econmica. En: Estudios sobre el contrato en general. Lima: Ara
Editores, 2003, p. 629.
84
VASQUEZ REBAZA, Walter. Los contratos coligados en fraude a la ley con especial referencia al modelo jurdico
italiano. Ob. Cit, p.14.
85
GABRIELLI, Enrico. Estudios sobre Teora General del Contrato. Ob. Cit, p. 183

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2
the cause of Objectivist Italians was identified with the need to satisfy, the
interest, purpose and reason of the contractor"86.
The specific economic function must be understood like global function of
the economic operation considered in its complexity87 that allows to value the
contractual autoregulation of interests of the parties, the behaviors to obtain
the results, the objective situation of the rules and behaviors88, the context
and circumstances of the contract.
Prominent relevance must be attributed to the "specific" cause and regulation
of interests effectively pursued by the parties beyond the type of contract, or
the coaligacion of contracts or the splitting between the contracts, what counts
is the economic operation created by the parties and the specific effect that
they wanted to do valued89 within the law and compatible with the General
principles of good faith, abuse of law, morality, public order and imperative
norms.
Tarsitano, says "motives that guide to every taxpayer in arrange a legal
form or contract are indifferent to the common law, but not to tax law, if those
were objectified in formulas" 90 , this last statement acknowledges the
importance of the specific cause of contracts in the tax field.
In practice - says Tabellini- any research on the subject of the tax avoidance
that is inherited from the theory of abuse, can not ignore the requirement of a
revaluation of the motives, often bypassed in the doctrine of the contract;
their revaluation is a critical stage91.
When Latam GAARs clauses refer to the obtaining of tax advantages
through acts or legal forms "inadequate", "improper", "atypical" or "artificial" in
the background is the lack of non tax reasons which connects us with the
"specific cause" which means a exam of the reasons for which held the
contract, for example if its purpose was to circumvent the qualitative or
quantitative aspect of the tax rules or to address real interests of parties
without tax avoidance purpose.
Therefore, the tax authority cannot qualify as "inappropriate" or "improper" or
"artificial" a transaction just because the purposes chased by the parties are
not adapted to the abstract cause as social economic function of the
contractual type, but when the interests or reasons that shape the specific
cause of the contract in the context and circunstances of the economic

86

SACCO, Rodolfo. Il motivo, il fine, gli interessiEn: Il contratto en Trattato di Diritto Civile, Dirigido por Rodolfo
Sacco, Tomo Primo, Terza edizione, Utet, Turn, 2004, p. 842. Citado por: MORALES, Romulo. El fin ilcito como la
funcin econmico-individual ilcita o la causa concreta ilcita en los contratos. Ob. Cit, p. 108.
87
FERRI, Giovanni Battista. Causa e tipo nella teoria del negozio giuridico. Ristampa inalterata, Giuffr Editore,
Miln, 1968. Pag. 387. Citado por: MORALES, Romulo. El fin ilcito como la funcin econmico-individual ilcita o la
causa concreta ilcita en los contratos. Ob. Cit, p. 110.
88
GABRIELLI, Enrico. Estudios sobre Teora General del Contrato. Ob. Cit, p. 463.
89
Idem, p. 145 y 146.
90
TARSITANO, Alberto. La clusula general antiabuso en el modelo del Cdigo Tributario para Amrica Latina.Ob.
Cit, p. 363.
91
TABELLINI, La Elusione Fiscale. Pag. 138. Citado por: ROSEMBUJ, Tulio. El fraude de ley y el abuso de las
formas en el Derecho Tributario. Madrid: Ed. Marcial Pons. 1993, p. 165.


transaction
avoidance.

General Antiavoidance Rules in LATAM and cause of contract 2

3
go against the purpose of the law having a sole aim of tax

7. Application of the GAAR .

Regarding the case of split reorganization commented in which the Peruvian
Tax Court expressed the view that the non fiscal reason for the taxpayer of
splitting the companies because of banking rules on intercompany debt limits
is irrelevant for not obeying to the purpose (social economic function)
consistent in that the company received the heritage block continue with
economic and legal activity with which these were used in the transferee that
in the case was that the Bank will continue with the business real estate and
construction industry, the question is how to apply the GAAR.
First, identify an appropriate figure that produces the same legal and
economic effects that the split reorganization, in this case would be the sales
contract, in both figures there is a structure of transfer of property in
exchange for money or shares, except the tax advantage because split
reorganization is exempt from VAT.
Second, evaluate if the elected form is adapted to the purpose and economic
operation, in this case there has been a piece of a company sold off without
delivery of shares to the shareholders of the company being divided, which is
required by the contractual type to not be sales contract.
In the example the split-off did not comply with the legal structure of have
issued shares to the shareholders of the company being divided because the
piece of a company has zero value, the active (building) has equal value that
the passive (accounts payable to the Bank), therefore, we wonder is this
sufficient to qualify the way chosen as "avoidance"?. We believe that it is only
an indication of "avoidance" which must be corroborated with an examination
of the underlying particular cause of the split which will assess whether
prevails non fiscal reason or fiscal reason is the third step.
Third, analyze the specific cause of the split-off, if it is based mainly on non
tax reasons or tax reasons, this will depend on qualify as an avoidance
operation and the tax consequences of the sale contract apply.
In the case, the taxpayer provided non tax reasons of the split-off like the
requirement of the Banking Regulation on limits of indebtedness between
related companies, which is the particular cause of the split-off considered as
" the reasons and specific interests that determine the parties to the
contract;... ... and give answer to the question: why the parties did the
contract?"92, however, the tax court applied the abstract cause (the company
which receives the heritage block continue with economic and legal activities
of the transferor) to qualify the split-off as avoidance.

92

ROPPO, Vincenzo. Causa concreta: Una storia di successo? Dialogo (non reticente, n compiacente) con la
giurisprudenza di legittimit e di merito. Citado por: MORALES, Romulo. El fin ilcito como la funcin econmicoindividual ilcita o la causa concreta ilcita en los contratos. En: Revista Dilogo con la Jurisprudencia. Ob. Cit. p.
108.

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The judgment does not explain why this "specific cause of contract" was
contrary to the law without analyze if the non fiscal reasons was relevant or
not with respect to the fiscal reasons (exempt VAT), or why transfer a
patrimonial block with zero value is an avoidance, which can lead to mistrust
and insecurity in economic sectors with respect to how the GAAR in many
Latam countries will be applied.
III. Conclusions:
-

Latam GAARs mention the terms "determine the true nature", "may
ignore", "attributed a meaning consistent with the facts", "qualify" which
expresses the recognition of the doctrine substance over form known in
Latam as juridical qualification of the facts that it is an ordinary power
of fiscal authority recognized in their Tax Codes in some Latam
countries or recognized by a jurisprudential development under the
General Principle of abuse of law and regulations about interpretation
of tax rules.

Latam GAARs also mention the terms acts or forms legal "inadequate",
"improper", "atypical", or "contrived", through which it has obtained a
tax advantage, which means investigate the particular cause of the
transaction, it is an special power of the tax authorities to non
recognize the tax consequences of the transaction chosen by the
taxpayer when it is qualified as tax avoidance because of lack of
business purpose and apply the corresponding tax provisions to the
eluded taxable transaction .

The contractual cause understood as economic-social function of the

contractual type only protects the general interests recognized by civil
or commercial regulation but it is insufficient to protect specific
interests pursued by the parties, both interests can be protected if the
cause is understood as a particular economic function of the
"contracts which expresses in its entirety the business, the demands
and interests of the contractors and the context and circumstances of
the contract released from the contractual type, and valued within the
law and consistent with the general principles of law".

- Fiscal authority cannot qualify a transaction for inadequate or

improper or "artificial" because the purposes pursued of the parties
are not same to the cause as social economic function of the "usual"
contractual type, but because these interests or reasons that shape the
particular cause of the transaction typical or atypical is against the law
and do not have the protection of the General Principles of Law, by
having a sole purpose of tax avoidance.