Principal purpose test restricts treaty benefits unless their grant conforms with the treaty's object and purpose.

A principal purpose test denies treaty benefits when obtaining the benefit was one of the principal purposes of arrangements or transactions, unless granting the benefit aligns with the treaty's object and purpose. The Simplified Limitation on Benefits (SLOB) may instead be applied by mutual choice and sets categorical qualifications for residents to obtain benefits, together with active conduct of business and ownership-based exceptions. Competent authorities must consult each other before rejecting or deciding requests and may grant benefits after factual review where abuse is not a principal purpose.

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