Action 6 (Treaty Abuse) is a key element of the OECD's BEPS Project. Action 6 handles treaty abuse, and in particular, Treaty Shopping, which allegedly is one of the most important BEPS Action plan concerns.
What is the OECD trying to achieve?
Double taxation treaties are agreements between two countries that aim to eliminate the double taxation of income which would otherwise be taxable in both countries under their domestic tax rules. The OECD is concerned that multinational groups may be structuring transactions to take advantage of more favourable treaties (treaty shopping) and/or engaging in tax planning arrangements using treaties in such a way they may result in double non-taxation.
Treaty shopping, i.e., where a person in country A, which is not, in principle, eligible to benefit from a given tax treaty with country B, invests through an entity in country C to benefit from the treaty. More generally, Action 6 intends to prevent the granting of treaty benefits in inappropriate circumstances.