The CIAT Executive Secretariat invites you to download and read chapter “4.6 Rules limiting tax base erosion through financial instruments” written by Jairo A. Godoy G. and Pablo Porporatto.

The section explores rules aimed at limiting tax base erosion through the use of financial instruments. It emphasizes how globalization and the increasing complexity of financial products can lead to practices that artificially reduce tax liabilities. The document proposes control measures such as: identifying the beneficial owner, applying the principle of economic substance over form, the Principal Purpose Test, anti-deferral rules,  thin capitalization limits, restrictions based on indicators such as EBITDA, amongst others. The section also highlights the importance of international information exchange and outlines regulatory experiences in countries like Argentina, Brazil, Chile, Colombia, Ecuador, Peru, and Mexico. These rules aim to strengthen the ability of tax administrations to detect and prevent abusive schemes, while adapting to global financial and technological developments.

This is the 40th section published within the framework of the “Manual on the Control of International Tax Planning” and is available in English and Spanish. The complete Manual consists of six sections made up of 42 chapters.